India and China - A GDP Comparison
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AndrewJin
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Since 1990s?
1990s-2012, dream came true!
Yes. India is a debtor country.
Fireurimagination
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Infrastructure and Manufacturing, unless we can catch up with China on these two fronts we won't be anywhere near them and for that also it will take a good 30-40 years I believe
Indeed，infrastructure，manufacturing， and more importantly，double digit growth over a decade！
GS Zhou
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I'm not an economist, so I respect your knowledge fully. But I still want to share my personal opinions about the PPP magic.
According to the WorldBank database, if we use the normal GDP dataset, China's GDP is 5.3x of India; but if we use PPP, China's PPP GDP reduces to around 2.5x of India. So it gives many people an impressions that price in China in general is 100% higher than in India; or one unit of currency can trade for 2x of goods or service in India, but can only trade for 1x in China.
I've been in India multiple times. My overall feeling on price in India is:
- hotel rate: the room rate for a decent hotel in downtown Mumbai is at the same level to an equivalent hotel in my hometown Shanghai
- McDonalds Prices: Shanghai is 10% higher than Mumbai
- taxi and bus rate: Mumbai is definitely cheaper. But this is not an "apple to apple" comparison. Because bus, or taxi in my hometown is more new and more clean than in Mumbai. (No offense, but that's the reality)
- Metro price: I tried the metro, and happy to see the metros are supplied by CSR of China. For my oneway metro trip, I paid RS30 or 50. Same to the price in Shanghai. But in Shanghai, we have ~20 lines. Much higher convenience! (I'm not sure if any new line added in Mumbai after my latest trip there)
- Meal: my friend took me to a decent restaurant at Nariman Point. The price is on par with a similar restaurant at a similar location in Shanghai.
- Car: I drive a Skoda Superb in Shanghai. Priced at RS 1,600,000; but it costs RS 2,600,000 in Mumbai. I also visited a Toyota dealership in Mumbai. The Mumbai Toyota price is NO cheaper than Toyota in Shanghai.
Caste system will lose its significance in one more generation. i.e in 25 years at maximum
Nanga Tarzan
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I agree with you regarding PPP. It would make more sense if each country were in its own silo. In such a scenario, PPP can be used as a basis for comparison but when it comes to external trade and FDI, it's the US dollar which matters.
Also, you are comparing india and China as of today which ia not a totally fair comparison given the headstart China had. As I had shown in my OP, India is at least 10 years behind China.
Nilgiri
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Thanks for your information. I actually saved this information you have given into my database of prices (I am making my own PPP verification).
I am not an economist either, I just did a minor in it along with Statistics....but I have a very large interest in the subject.
Now coming to your overall points (which overall I agree with):
"Quality"/"feel" of goods is something that is not captured by PPP, neither is it captured by nominal direct exchange rate (unless the good is traded internationally - and then it depends on the level/permeation of this trade).
This works both ways, I have seen many high quality goods produced and consumed in rural India (be it agricultural produce, craftsmanship products, consumables, repair services etc etc) which are definitely not captured by nominal measure (since they are not traded even beyond their state much less country).
So which one outweighs the other? The "cheaper" feel stuff or the more "quality" stuff w.r.t their consumption? Its difficult to say overall, since you would have to literally visit every corner of India yourself and collect price level data and maybe give some notion of "quality" of product/service so you can use that as a coefficient to give "Net" PPP or something and weight it appropriately in the final aggregation. This would then have to be done for every country in the world, not an easy task, given how difficult it is to collect, compile and analyse meaningful PPP and even regular GDP data in the first place.
It is a bit of a juggling thing since when you want to make a measure "better" in some way, you have to add complexity to it and this can add bias.
That's why one must know the caveats of EACH measure that's being used. Its not to say that nominal is worse overall or PPP is better overall. It depends on the particular use....and knowing the pros and cons of each. PPP basically captures that which is not exposed to world markets basically. Thats the single largest difference. Rural India is still the bulk of India population, thus its PPP differential is going to be a lot bigger than China's which is more urbanised and also has more exposure to world trade and markets overall (and thus its prices esp with is massive trade in USD, is going to be a lot closer to US/western price levels)
Urban prices in India (like you saw in Mumbai) are definitely not going to have the same PPP multiplier as the rural areas...given logistics and cost of transporting/energy/middlemen etc for a wide variety of goods and services combined with greater exposure to the world market to source these. Its the same reason why China's PPP is overall not as high multiplier as India....it has greater exposure and integration with world markets and supply chains....and also much larger urbanisation.
Which brings up the point that China PPP in 2011 ICP as far as I understand it could be definitely under-estimated given that the price level data only came from cities (and i think the new revision included towns).....but no rural data....unlike India which has had a massive rural price collection since its independence (the backseries is quite massive and established even before that under the British - I have seen it during my research).
However this underestimation of China PPP is not a huge issue for China given it has operationalised its nominal through integration, trade with the world....not to mention its urbanisation will eventually equal that of the developed urban world....so eventually it will normalise much like most developed countries have w.r.t nominal/PPP.
Thus I would not compare China and India completely directly in either nominal or PPP without understanding the caveats. Definitely would not use such things as 2 times, 3 times etc (for nominal or PPP based values) because they imply the same standardisation in the level of underlying data which is very different. Nonetheless comparisons happen anyway, even by economists....because thats the whole point of numbers face value. Few go into reading up and understanding the numbers.
The one thing we can agree is that China is well ahead overall development wise socioeconomically. It can be compared in metrics that can be physically measured or estimated quite directly from these (health, education, straight but relevant volume consumptions) but at the base level (I have a disdain for many composite indices, you can ask @Shotgunner51 about it). These base numbers of effectively what are volumes and direct measurements should provide more accurate indications of where each country stands in the development path. But of course there are so many of them, data is sometimes hard to come by on 1:1 basis, and is often quoted selectively within a context. So thats why the advantage of the "total" (GDP, nominal PPP) is clear in this regard. Guess you can never completely win.
But I am pleasantly surprised in some things that Andrew posted like PC stocks, India seems to be at around half that of China now which I did not expect. Also socioeconomically, India is just hitting its cruise phase now (take off was the last 10 - 20 years) so the lag time with China will be reduced in these metrics mostly from now till about 2030 (given China pace in socioeconomic improvement has little speed left given it has put that phase behind it largely esp w.r.t demographics, health etc). I think at 2020 we will need to do a complete revisit since better data will be available from the World Bank by then (they are in the process of a major overhaul right now).
In the meantime I would like to see if @AndrewJin and others have more specific consumption volume based data of various goods and services for both China and India so I can look these up myself and see if anything newer has materialised.
Anyways it was good having a chat with you, hope I didn't bore you.
@PARIKRAMA @ahojunk @LA se Karachi @Khan_21 @itachii @proud_indian @WAJsal @Joe Shearer
@Vergennes @nair @SpArK @MilSpec @Water Car Engineer @Bombaywalla @farhan_9909
Don't know who's cup of tea it is so I tagged you all. Feel free to tag others.
I will also leave you with this for your interest to get an idea of how India is changing now:
Like Bob Dylan sang "the times they are a changin".
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Joe Shearer
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Thanks for your information. I actually saved this information you have given into my database of prices (I am making my own PPP verification).
I am not an economist either, I just did a minor in it along with Statistics....but I have a very large interest in the subject.
Now coming to your overall points (which overall I agree with):
"Quality"/"feel" of goods is something that is not captured by PPP, neither is it captured by nominal direct exchange rate (unless the good is traded).
This works both ways, I have seen many high quality goods produced and consumed in rural India (be it agricultural produce, craftsmanship products, consumables, repair services etc etc) which are definitely not captured by nominal measure (since they are not traded even beyond their state much less country).
So which one outweighs the other? The "cheaper" feel stuff or the more "quality" stuff w.r.t their consumption? Its difficult to say overall, since you would have to literally visit every corner of India yourself and collect price level data and maybe give some notion of "quality" of product/service so you can use that as a coefficient to give "Net" PPP or something and weight it appropriately in the final aggregation. This would then have to be done for every country in the world, not an easy task, given how difficult it is to collect, compile and analyse meaningful PPP and even regular GDP data in the first place.
It is a bit of a juggling thing since when you want to make a measure "better" in some way, you have to add complexity to it and this can add bias.
That's why one must know the caveats of EACH measure that's being used. Its not to say that nominal is worse overall or PPP is better overall. It depends on the particular use....and knowing the pros and cons of each. PPP basically captures that which is not exposed to world markets basically. Thats the single largest difference. Rural India is still the bulk of India population, thus its PPP differential is going to be a lot bigger than China's which is more urbanised and also has more exposure to world trade and markets overall (and thus its prices esp with is massive trade in USD, is going to be a lot closer to US/western price levels)
Urban prices in India (like you saw in Mumbai) are definitely not going to have the same PPP multiplier as the rural areas...given logistics and cost of transporting/energy/middlemen etc for a wide variety of goods and services combined with greater exposure to the world market to source these. Its the same reason why China's PPP is overall not as high multiplier as India....it has greater exposure and integration with world markets and supply chains....and also much larger urbanisation.
Which brings up the point that China PPP in 2011 ICP as far as I understand it could be definitely under-estimated given that the price level data only came from cities (and i think the new revision included towns).....but no rural data....unlike India which has had a massive rural price collection since its independence (the backseries is quite massive and established even before that under the British - I have seen it during my research).
However this underestimation of China PPP is not a huge issue for China given it has operationalised its nominal through integration, trade with the world....not to mention its urbanisation will eventually equal that of the developed urban world....so eventually it will normalise much like most developed countries have w.r.t nominal/PPP.
Thus I would not compare China and India completely directly in either nominal or PPP without understanding the caveats. Definitely would not use such things as 2 times, 3 times etc (for nominal or PPP based values) because they imply the same standardisation in the level of underlying data which is very different. Nonetheless comparisons happen anyway, even by economists....because thats the whole point of numbers face value. Few go into reading up and understanding the numbers.
The one thing we can agree is that China is well ahead overall development wise socioeconomically. It can be compared in metrics that can be physically measured or estimated quite directly from these (health, education, straight but relevant volume consumptions) but at the base level (I have a disdain for many composite indices, you can ask @Shotgunner51 about it). These base numbers of effectively what are volumes and direct measurements should provide more accurate indications of where each country stands in the development path. But of course there are so many of them, data is sometimes hard to come by on 1:1 basis, and is often quoted selectively within a context. So thats why the advantage of the "total" (GDP, nominal PPP) is clear in this regard. Guess you can never completely win.
But I am pleasantly surprised in some things that Andrew posted like PC stocks, India seems to be at around half that of China now which I did not expect. Also socioeconomically, India is just hitting its cruise phase now (take off was the last 10 - 20 years) so the lag time with China will be reduced in these metrics mostly from now till about 2030 (given China pace in socioeconomic improvement has little speed left given it has put that phase behind it largely esp w.r.t demographics, health etc). I think at 2020 we will need to do a complete revisit since better data will be available from the World Bank by then (they are in the process of a major overhaul right now).
In the meantime I would like to see if @AndrewJin and others have more specific consumption volume based data of various goods and services for both China and India so I can look these up myself and see if anything newer has materialised.
Anyways it was good having a chat with you, hope I didn't bore you.
@PARIKRAMA @ahojunk @LA se Karachi @Khan_21 @itachii @proud_indian @WAJsal @Joe Shearer
@Vergennes @nair @SpArK @MilSpec @Water Car Engineer @Bombaywalla @farhan_9909
Don't know who's cup of tea it is so I tagged you all. Feel free to tag others.
I will also leave you with this for your interest to get an idea of how India is changing now:
Like Bob Dylan sang "the times they are a changin".
Why the HELL can't you stick to this kind of brilliant note rather than trolling us Bengalis?
You are a stupid git, @Nilgiri .
MOST informative and very interesting. Many thanks, Sir.
Nilgiri
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Business and pleasure must be balanced
I hope to balance it better with time...come on there has already been improvement now right?
AndrewJin
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For the SAME quality product and service, very likely cheaper in China than in India....
High-quality products and service in india are generally overpriced.
And remember, China's PPP is measured based on 20+ major cities in the East.
You know in Shanghai bus ticket is 2yuan, but in many cities, it costs 1 yuan and less than 1 yuan when you use a city transport card.
Nilgiri
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Do you know if China collects price level data for its rural areas at all? Or this was a deliberate policy to use only urban price levels for ICP program?
AndrewJin
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No date for county, smaller cities, townships, countryside.....
Most Chinese live in smaller cities and townships.
PPP is Estimated by the West.
Nilgiri
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Actually that was for ICP 2005.
That was a preliminary round that China participated in and thus used only the large cities + selected eastern urban provinces you talk of.
For ICP 2011 (released in 2014), China became a full member of the process and conducted full sampling in rural and other spectrums of habitations comprehensively:
http://siteresources.worldbank.org/ICPEXT/Resources/2011-ICP-Global-Report.pdf
When I wrote my paper, it was of the 2005 series where the problem with China PPP estimate existed, hence I brought it up. I have to read the full 2011 data procedure for China when I got time to see what the exact differences are.
The full "western based" estimate for China PPP that you talk of was done before the 2005 series on very limited data and lots of extrapolation (the 1993 series when ICP was first started by world bank).
The PPP series has now been corrected somewhat using the 2011 data.
Here's an interesting diagram for those interested (of course its 2011 data):
Sheikh Rauf
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Why in the world people actually compare China with india just cuz of population?
India is no where close to china in economy and wont be atleast in next 50 years by then world will be way far ahead
.. life of vietnam is getting better... india is only dreaming... they cant till people have their basics.
India is no where close to china in economy and wont be atleast in next 50 years by then world will be way far ahead
.. life of vietnam is getting better... india is only dreaming... they cant till people have their basics.
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