Putting IMF's PPP GDP to the test

[Martian2]

Putting IMF's PPP GDP to the test

We have three important charts with data from BP, the World Bank, and Nature Publications.

From BP, we know China is the world's largest consumer of energy.
From the World Bank, we know China is the world's largest exporter of high-tech products.
From Nature Publications, we know China is the world's second-largest producer of quality scientific research.

It stands to reason that China is the world's largest economy as shown by the IMF PPP GDP chart. China's technology level is close to the United States. Since China consumes the most energy, it produces the most total goods and services.

It is a very different story when we evaluate whether India is truly the world's third-largest economy (as indicated by the IMF PPP GDP chart).

Though India is the world's fourth-largest consumer of energy, it doesn't measure up in value-added high-tech exports. India falls outside of the Top 7 in high-tech exports. This means the Indian economy does not produce a lot of high-value goods. Also, India is not part of the Top 7 Nature Index. This means the level of Indian science and technology is on the low side.

If India had science and technology equal to China then it would indeed deserve to be ranked as the world's third-largest economy (per IMF PPP GDP chart). However, India exports few high-tech goods. Also, India is not a science research power.

Since China exports five-axis CNC machine tools and India exports mangoes, we have to adjust the GDP comparison for the two countries. If Indian and Chinese technology and science were the same, the Indian GDP would be proportional to the level of energy consumption. This means India would be about 1/5 of the Chinese economy. China consumes about 3,000 Million Tonnes Oil Equivalent (MTOEs) and India consumes about 600 MTOEs per year (3,000/600 = 5:1).

Since China's technology (see World Bank chart on leading high-tech exporters) and science (see Nature Index) are far superior to India's, we have to multiply China's "effective" GDP by 1.5 or 2 when comparing it to India. This is the machine tools vs. mangoes multiplier effect. Since machine tools are far more valuable than mangoes, China's GDP must be scaled up accordingly.

In conclusion, China's real GDP should be 7.5 to 10 times larger than India's current GDP. The IMF PPP GDP chart claims that China's GDP is only about 2.5 times larger than India's. This is clearly erroneous and there is something seriously wrong with the IMF methodology or data collection in India.
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[herono1]

You should be given noble price in economics for your research.

 

[Martian2]

India needs to make Top 5 in all three categories to support IMF PPP GDP ranking

Realistically speaking, India needs to be among the Top Five in all three categories to make a plausible claim as the world's third-largest economy by PPP GDP.

 

[dy1022]

you know what?

demoncracy can't losing face!

this is the must be done by IMF/western medias or vedic math!

The realistic GDP PPP from India should be between Russia and Germany at the most!

NOT credible or Incredible Shinning ???

this is the question!

 

[flist3773]

@Martian2

Actually, there is a better way to realistically adjust India's exaggerated GDP figures (both in nominal and PPP).
We can simply divide its GDP figures by 2. That way, other nations (not just China) can see where they stand compare to India. There was a report from WSJ that India's gdp growth rate was exaggerated such that by applying the same metrics used in the USA or other industrialized nations, India's GDP was somewhere around 4 percents. I think that figure is a bit too optimistic, but nonetheless it shows how much India's GDP is totally disconnected from real world.

 

[Martian2]

China has 18 times more installed industrial robots than India

There are four critical determinants of GDP.

1. Energy consumption
2. Technology and Scientific base
3. High-tech exports
4. Degree of automation

China is world #1 in energy consumption.
China is world #2 in quality science research.
China is world #1 in high-tech exports.
China is world #1 in added industrial robots per year. China is a strong world #2 in total installed industrial robots.

This means Chinese productivity is in the stratosphere compared to India's economy. Industrial robots work 24 hours per day. Thus, automation is a huge force multiplier.

India consumes 1/5th the amount of energy that China does.
India's (911 WFC articles) Nature Index is 1/7th China's level (6,728 WFC articles).
Indian ($17 billion) high-tech exports is 3% or 1/33rd of China's ($560 billion).
Indian industrial automation is 1/18th China's.

Looking at all four factors, real Indian GDP should be about 1/10th to 1/15th of China's.

Let's walk through the logic. If India possessed equal technology and productivity to China then its GDP would be 1/5th or 20% China's size (based on proportional energy consumption).

Indian high-tech exports is 1/33rd of China's. Indian science research is 1/7th China's. Strictly speaking, the Indian economy should be rated 1/5th of China's on this factor. This means the overall Indian GDP should be multiplied by 0.2 to adjust for the difference in technology.

Indian industrial automation is 1/18th of China's. Strictly speaking, the Indian economy should be multiplied by 0.056 based on poor Indian productivity.

Indian GDP starts at 1/5th of China's (based on proportional energy consumption) * 0.2 (to adjust for technological difference) * 0.056 (to adjust for productivity difference in automation) = 0.2 percent of China's economy (this is the lower bound)

To be generous, I'll just guess that India's economy is 1/10th (10 percent) to 1/15th (7 percent) of China's economy. This will bridge the gap in the argument that not all industries are automated.

There is no way the IMF can convince an intelligent person that the Indian economy is 41% of the Chinese economy, which the IMF PPP GDP is claiming.
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Statistics - IFR International Federation of Robotics

 

[flist3773]

Rather not scientific ways of comparing the living standards of two different countries, but look at how much Apple generates its revenue from China and India. You will be shocked.

 

[TaiShang]

Impressive scientific analysis @Martian2

 

[Faiez]

There are four critical determinants of GDP.

1. Energy consumption
2. Technology and Scientific base
3. High-tech exports
4. Degree of automation

A chinese guy teaching how to calculate GDP (irony). LOL.

 

[empirefighter]

A chinese guy teaching how to calculate GDP (irony). LOL.

YOU are the IRONY ONE. If you donot agree ,you can post your opnion, Dnot use ''LOL" to hide your ignorance.

 

[egodoc222]

Another India bashing thread lol?
Whatever gives you orgasms!!!

 

[seven7seven]

I personally think both China and India fudge their GDP numbers. The former, purposely under-reporting to make their economy seem far smaller than it really is, and the latter padding out their figures to make them seem more impressive than it really is.

China has been, in real terms, the largest economy for a long time now but are happy for people to compare its GDP in nominal US Dollar terms because it makes them seem smaller, and thus less threatening to the US and its stooges. Anyone with a brain knows that should China let the Yuan appreciate to its true value, its true size would be several times that of the USA's. This will eventually happen but not until China's military strength is commensurate with its economic might and when China has matured and developed its own domestic consumer market. Until then, let's just let them keep believing what they want to.

 

[Beidou2020]

I personally think both China and India fudge their GDP numbers. The former, purposely under-reporting to make their economy seem far smaller than it really is, and the latter padding out their figures to make them seem more impressive than it really is.

China has been, in real terms, the largest economy for a long time now but are happy for people to compare its GDP in nominal US Dollar terms because it makes them seem smaller, and thus less threatening to the US and its stooges. Anyone with a brain knows that should China let the Yuan appreciate to its true value, its true size would be several times that of the USA's. This will eventually happen but not until China's military strength is commensurate with its economic might and when China has matured and developed its own domestic consumer market. Until then, let's just let them keep believing what they want to.

I don't think the yuan will appreciate. China has had massive capital outflows and China's forex reserves have gone from $4 trillion to $3.4 trillion within a few months to preven a massive depreciation of the yuan. If China allowed the yuan to float, it would depreciate a lot. China can burn through its massive forex reserves to prop up the yuan for a few months because it has earned that right by earning a lot of forex reserves from trade surpluses and currency intervention (to prevent appreciation) during the good periods.

Right now the Chinese economy has an overcapacity problem due to the slowdown in the export markets and property market which producers thought would keep booming.

Industrial profits are crashing for state-owned companies which dominate industries like steel, cement, glass, etc. These industries are heavily connected to the health of the property sector. Property prices were going through the roof and the government put the brakes on it. Property is important in every country because so many industries are directly and indirectly affected by the property sector.

Industry is having a really hard time in China. Electricity consumption for industry is actually declining due to the weakness in the export markets. PMI manufacturing is struggling.

Services sector is doing pretty well and private companies in China are doing relatively well with their profits increasing about 6%.

China is lucky it has a vibrant private sector because if the Chinese economy was solely reliant on state-owned companies, China would be in major trouble.

The reform has been too slow to keep up with the slowdown of the economy.

Failing companies should be allowed to fail because that's the market giving the signal that their business is inefficient and not viable.

 

[seven7seven]

I don't think the yuan will appreciate. China has had massive capital outflows and China's forex reserves have gone from $4 trillion to $3.4 trillion within a few months to preven a massive depreciation of the yuan. If China allowed the yuan to float, it would depreciate a lot. China can burn through its massive forex reserves to prop up the yuan for a few months because it has earned that right by earning a lot of forex reserves from trade surpluses and currency intervention (to prevent appreciation) during the good periods.

Right now the Chinese economy has an overcapacity problem due to the slowdown in the export markets and property market which producers thought would keep booming.

Industrial profits are crashing for state-owned companies which dominate industries like steel, cement, glass, etc. These industries are heavily connected to the health of the property sector. Property prices were going through the roof and the government put the brakes on it. Property is important in every country because so many industries are directly and indirectly affected by the property sector.

Industry is having a really hard time in China. Electricity consumption for industry is actually declining due to the weakness in the export markets. PMI manufacturing is struggling.

Services sector is doing pretty well and private companies in China are doing relatively well with their profits increasing about 6%.

China is lucky it has a vibrant private sector because if the Chinese economy was solely reliant on state-owned companies, China would be in major trouble.

The reform has been too slow to keep up with the slowdown of the economy.

Failing companies should be allowed to fail because that's the market giving the signal that their business is inefficient and not viable.

I wasn't saying that Yuan will appreciate overnight or with a flip of a switch. It will be a gradual process, maybe over decades. China is always patient.

What you have mentioned is inevitable for a developing nation, transitioning from exporting bulk, low-end goods, to one that is developed and manufactures high value-add goods that is more balanced between exports and domestic consumption. To spur Chinese consumers to spend more, China will have to bestow greater purchasing power and appreciate the Yuan. There will be bumps in the road and it will be a great challenge ahead for China, but they have overcome far bigger challenges. I have great confidence in the Chinese people to succeed and show the US that a World leader can succeed through trade and commerce, and not through threats, sanctions and endless wars.

 

[oproh]

Another India bashing thread lol?
Whatever gives you orgasms!!!

Oh look, another butthurt indian, go cry in the corner.