Lil Mathew
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India displaces Japan to become third-largest world economy in terms of PPP: World Bank - The Economic Times on Mobile
NEW DELHI: India has displaced Japan to become the
world's third biggest economy in terms of purchasing
power parity (PPP), according to a World Bank report
released on Tuesday.
The 2011 round of the bank's International
Comparison Program (ICP) ranked India after the US
and China. The last survey in 2005 had placed the
country on 10th place .
PPP is used to compare economies and incomes of
people by adjusting for differences in prices in different
countries to make a meaningful comparison.
India's share in World GDP in terms of PPP was 6.4%
in 2011 compared with China's 14.9% and the US'
17.1%, the latest ICP showed. The survey covered 199
economies.
"The United States remained the world's largest
economy, but it was closely followed by China when
measured using PPPs. India was now the world's
third largest economy, moving ahead of Japan," the
report said.
Despite high inflation in India in recent years, prices in
the country are still well below those in advanced
economies, explaining the higher raking for India on
the PPP measure. But according to the International
Monetary Fund (IMF), India's economy is 12th largest
and only about a third of Japan's in terms of absolute
unadjusted dollars. "The economies with the lowest
prices are either in Africa or Asia and the Pacific and
include India, which has the third-largest economy,"
the report noted.
"Because economies estimate their GDP at national
price levels and in national currencies, those GDPs are
not comparable. To be compared, they must be
valued at a common price level and expressed in a
common currency," the report said, giving out the
rationale for the PPP adjustments.
For example,
people in a
country with
higher average
per capita
income may not
necessarily have
a better quality
life than a
country with
lower average per
capita income.
This makes it a good tool to compare poverty levels
across countries.
"One major use of PPPs is poverty assessment using
the World Bank's international poverty threshold of
$1.25 per day per person. National poverty
assessments differ because the purchasing power of
national currencies differs from one economy to
another," the report said.
In terms of per capita GDP, even in PPP terms, India
ranks very low at 127 in the 199-country ranking.
"The largest economies were not the richest, as
shown in the ranking of GDP per capita. The middle-
in-come economies with large economies also had
large populations, setting the stage for continued
growth," the report noted.
In the latest ranking, India's economy was 37.1% of
the US economy compared with 18.9% in 2005.
The report said in terms of spending power, the
differences have come down.
"The spread of per capita actual individual
consumption as a percentage of that of the United
States has been greatly reduced, suggesting that the
world has become more equal," it said but cautioned
some of this could be due to changes in the
methodology.
NEW DELHI: India has displaced Japan to become the
world's third biggest economy in terms of purchasing
power parity (PPP), according to a World Bank report
released on Tuesday.
The 2011 round of the bank's International
Comparison Program (ICP) ranked India after the US
and China. The last survey in 2005 had placed the
country on 10th place .
PPP is used to compare economies and incomes of
people by adjusting for differences in prices in different
countries to make a meaningful comparison.
India's share in World GDP in terms of PPP was 6.4%
in 2011 compared with China's 14.9% and the US'
17.1%, the latest ICP showed. The survey covered 199
economies.
"The United States remained the world's largest
economy, but it was closely followed by China when
measured using PPPs. India was now the world's
third largest economy, moving ahead of Japan," the
report said.
Despite high inflation in India in recent years, prices in
the country are still well below those in advanced
economies, explaining the higher raking for India on
the PPP measure. But according to the International
Monetary Fund (IMF), India's economy is 12th largest
and only about a third of Japan's in terms of absolute
unadjusted dollars. "The economies with the lowest
prices are either in Africa or Asia and the Pacific and
include India, which has the third-largest economy,"
the report noted.
"Because economies estimate their GDP at national
price levels and in national currencies, those GDPs are
not comparable. To be compared, they must be
valued at a common price level and expressed in a
common currency," the report said, giving out the
rationale for the PPP adjustments.
For example,
people in a
country with
higher average
per capita
income may not
necessarily have
a better quality
life than a
country with
lower average per
capita income.
This makes it a good tool to compare poverty levels
across countries.
"One major use of PPPs is poverty assessment using
the World Bank's international poverty threshold of
$1.25 per day per person. National poverty
assessments differ because the purchasing power of
national currencies differs from one economy to
another," the report said.
In terms of per capita GDP, even in PPP terms, India
ranks very low at 127 in the 199-country ranking.
"The largest economies were not the richest, as
shown in the ranking of GDP per capita. The middle-
in-come economies with large economies also had
large populations, setting the stage for continued
growth," the report noted.
In the latest ranking, India's economy was 37.1% of
the US economy compared with 18.9% in 2005.
The report said in terms of spending power, the
differences have come down.
"The spread of per capita actual individual
consumption as a percentage of that of the United
States has been greatly reduced, suggesting that the
world has become more equal," it said but cautioned
some of this could be due to changes in the
methodology.
. U simply dont know what u just said. 
. Am I right ? or Am I right? 
