India overtakes Japan to become third-largest economy (PPP)

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  1. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    India overtakes Japan to become third-largest economy in purchasing power parity -The Economic Times

    NEW DELHI: Its economy may be in the grips of a slowdown, its polity paralysed and markets morose, but all this hasn't prevented India from overtaking Japan to become the world's third-largest economy in purchasing power terms.

    Data just released by the International Monetary Fund (IMF) shows that India's gross domestic product in purchasing power parity (PPP) terms stood at $4.46 trillion in 2011, marginally higher than Japan's $4.44 trillion, making it the third-biggest economy after the United States and China.

    India's share in world GDP in terms of PPP, a measure of relative consumer prices across countries, stood at 5.65% in 2011 against Japan's 5.63%, with the gap expected to widen significantly by 2017. In five years, the IMF estimates the share of India's GDP in PPP terms would grow to 8.09% compared with 4.8% for Japan.

    Economists said India's move up the league table was a reminder of the boundless potential the country offered, despite the prevailing mood of pessimism.

    "This basically turns the spotlight back on the tremendous opportunity India's growth story has even under the given conditions. If India plays its cards correctly through policy measures we can actually achieve much more in the next 5-10 years," said Saugata Bhattacharya, chief economist with Axis Bank.

    Added Samiran Chakraborty, chief economist with Standard Chartered India: "This shows that India is no longer an emerging economy. It has already emerged. But beyond that there are not many conclusions one can take from the data." The PPP system allows GDP comparisons to be made by asking how much money would be needed to purchase the same goods and services in two countries and using that to calculate an implicit foreign exchange rate.

    Under this method, a dollar should be able to buy the same amount of goods anywhere in the world and exchange rates should adjust accordingly. It also strips away distortions that come with market exchange rates, which are often volatile, affected by political and financial factors that do not lead to immediate changes in income and tend to understate the standard of living in poor countries.

    The Economist magazine's proprietary Big Mac Index, which takes the price of a McDonald burger across 120 countries to calculate the 'real' price of their currencies, is another crude way to measure PPP. India was included in the index recently. It showed that the Indian rupee was undervalued by 62% against the US dollar in January.

    PPP methods help adjust income to prices for a meaningful comparison on quality of life in countries with widely different prices and incomes.

    "The PPP comparison is more useful while comparing the standards of living between countries," said Ulrich Bartsch, a senior macroeconomist in the World Bank's India office, adding that while the per capita GDP in PPP terms shows that India still has some distance to go to reach Japanese levels, "the difference is less than the comparison of per capita GDP in nominal dollar terms would indicate".

    India, according to the IMF's calculations, was able to overtake Japan in 2011 because its economy grew 7.24% whereas in the case of Japan, it shrank 0.75%, hit by a tsunami that ravaged the country and exacerbated the adverse impact of global economic slowdown.

    While India may have beaten Japan under this particular system of calculation, under more conventional methods of measurement, it has to travel a long distance to catch up. Under the regular method of GDP calculation, India's economy is well behind Japan. Even assuming an average economic growth rate of 7.5% over the next five years, the Indian economy will be only $2.9 trillion compared with Japan's $6.69 trillion.

    For the fiscal year to end-March 2013, official forecasts are for GDP growth of around 7%, slightly higher than the 6.9% expected in the previous year and much lower than 8.4% the year before.

    Economists reckon that India will continue to lag behind when it comes to matching living standards of its population with more developed western and Asian economies.

    Yet, with its demographic advantage and prospects of sustainable high growth over the next five years, the country is expected to consistently improve its global economic standing.
     
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  3. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    China is next.
     
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  4. JAISWAL

    JAISWAL Senior Member Senior Member

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    India overtakes Japan to become third- largest economy in purchasing power parity

    NEW DELHI: Its economy may be in the grips of a slowdown, its polity paralysed and markets morose, but all this hasn't prevented India from overtaking Japan to become the world's third-largest economy in purchasing power terms.

    Data just released by the International Monetary Fund (IMF) shows that India's gross domestic product in purchasing power parity (PPP) terms stood at $4.46 trillion in 2011, marginally higher than Japan's $4.44 trillion, making it the third-biggest economy after the United States and China.

    India's share in world GDP in terms of PPP, a measure of relative consumer prices across countries, stood at 5.65% in 2011 against Japan's 5.63%, with the gap expected to widen significantly by 2017. In five years, the IMF estimates the share of India's GDP in PPP terms would grow to 8.09% compared with 4.8% for Japan.

    Economists said India's move up the league table was a reminder of the boundless potential the country offered, despite the prevailing mood of pessimism.

    "This basically turns the spotlight back on the tremendous opportunity India's growth story has even under the given conditions. If India plays its cards correctly through policy measures we can actually achieve much more in the next 5-10 years," said Saugata Bhattacharya, chief economist with Axis Bank.

    Added Samiran Chakraborty, chief economist with Standard Chartered India: "This shows that India is no longer an emerging economy. It has already emerged. But beyond that there are not many conclusions one can take from the data." The PPP system allows GDP comparisons to be made by asking how much money would be needed to purchase the same goods and services in two countries and using that to calculate an implicit foreign exchange rate.

    Under this method, a dollar should be able to buy the same amount of goods anywhere in the world and exchange rates should adjust accordingly. It also strips away distortions that come with market exchange rates, which are often volatile, affected by political and financial factors that do not lead to immediate changes in income and tend to understate the standard of living in poor countries.
    [​IMG]


    The Economist magazine's proprietary Big Mac Index, which takes the price of a McDonald burger across 120 countries to calculate the 'real' price of their currencies, is another crude way to measure PPP. India was included in the index recently. It showed that the Indian rupee was undervalued by 62% against the US dollar in January.

    PPP methods help adjust income to prices for a meaningful comparison on quality of life in countries with widely different prices and incomes.

    "The PPP comparison is more useful while comparing the standards of living between countries," said Ulrich Bartsch, a senior macroeconomist in the World Bank's India office, adding that while the per capita GDP in PPP terms shows that India still has some distance to go to reach Japanese levels, "the difference is less than the comparison of per capita GDP in nominal dollar terms would indicate".
    India, according to the IMF's calculations, was able to overtake Japan in 2011 because its economy grew 7.24% whereas in the case of Japan, it shrank 0.75%, hit by a tsunami that ravaged the country and exacerbated the adverse impact of global economic slowdown.

    While India may have beaten Japan under this particular system of calculation, under more conventional methods of measurement, it has to travel a long distance to catch up. Under the regular method of GDP calculation, India's economy is well behind Japan. Even assuming an average economic growth rate of 7.5% over the next five years, the Indian economy will be only $2.9 trillion compared with Japan's $6.69 trillion.

    For the fiscal year to end-March 2013, official forecasts are for GDP growth of around 7%, slightly higher than the 6.9% expected in the previous year and much lower than 8.4% the year before.

    Economists reckon that India will continue to lag behind when it comes to matching living standards of its population with more developed western and Asian economies.

    Yet, with its demographic advantage and prospects of sustainable high growth over the next five years, the country is expected to consistently improve its global economic standing.
    .
    .
    India overtakes Japan to become third-largest economy in purchasing power parity - The Economic Times
     
  5. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    I was under the impression that China ppp per capita income had crossed the 10,000usd mark, well, not quite so. Also their ppp per capita income is just slightly more than double that of India's.

    IMF 2011: China: 8,382, India: 3,694

    WB 2010: China: 7,599, India: 3,425

    CIA FB 2011: China: 8,400, India: 3,700

    In PPP terms India doesn't seem to have done all that badly considering we should be at the present (2011-12) Chinese PPP per capita levels in less than a decade's time, may be sometime around 2020.
     
  6. KS

    KS Bye bye DFI Veteran Member

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    In nominal terms Indian economic growth is slowing down from the high steam sprint two years before and we should be concerned about that.

    There is a visible policy paralysis at the top - NOT because of inaction from the Govt or lack of ideas on forward moving..but because of the clear clash of ideas/idealogies between the reformist group (MMS, Pranab da) and the populist kitchen cabal of Sonia,Rahul. As now as it stands, the populist faction is winning and the reform moves have been put in limbo.

    Unless the Govt grows the consensus to push ahead of the reform, I fear the honeymoon phase of Indian economic growth is fastly coming to an end.



    Not in this decade, at the least.
     
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  7. Yusuf

    Yusuf GUARDIAN Administrator

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    When today's PPP figure becomes the Nominal GDP in about 8-10 years time considering a 7% growth we'd say we've arrived as an economic power.
     
  8. nasavsisro

    nasavsisro Regular Member

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    Just go to buy indian Product only and it help to economy :)
     
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  9. utubekhiladi

    utubekhiladi The Preacher Elite Member

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    please watch this video

    world sees India as rising global and regional super power

     
    Last edited by a moderator: May 10, 2015
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  10. A chauhan

    A chauhan "अहिंसा परमो धर्मः धर्म हिंसा तथैव च: l" Senior Member

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    But we are purchasing Chinese products !! our market are filled with cheap Chinese products which is damaging our local market and manufacturing :confused: :crutch:

    China is financially invading us !
     
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  11. Vishwarupa

    Vishwarupa Senior Member Senior Member

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    china will overtake USA soon.
     
  12. cir

    cir Senior Member Senior Member

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    PPP again?:rofl:

    Don‘t know where India’s PPP figure is from。

    As for China,its GDP in PPP has always been a rough estimate, for China didn't join the ICP programme of the World Bank till 2011. The current estimates, as used or quoted by various sources and publications, are based on brief surveys conducted in some 30 cities along the east coast,and as such the results are not representative of the whole country。

    2011 is the latest base year for a new round of ICP surveys, in which China has,for the first time, fully participated。 the results, ie China's GDP in terms of PPP, shall be known in the next couple of years。
     
    Last edited: Apr 21, 2012
  13. no smoking

    no smoking Senior Member Senior Member

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    Good luck!
     
  14. cir

    cir Senior Member Senior Member

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    Talking about our ever-so-optimistic Indian friends。。。。:rofl:
     
  15. Adux

    Adux Senior Member Senior Member

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    Hey, chicom little idiot, wait for your real estate bubble.
     
  16. Adux

    Adux Senior Member Senior Member

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    That said, It is stupid to talk about in terms of PPP
     
  17. Godless-Kafir

    Godless-Kafir DFI Buddha Senior Member

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    Ya PPP again, whats your point? PPP measures economic activity in a nation perfectly. If a hair cut costs 50$ in USA it costs 100Rs in India and only the Hair cut as an Job is taken into account and not the value as per currency. What is important is that it shows how many people are involved in constructive economic activity. We dont need to devalue our currency and compare ourself to some European nation whose currency value fudges the actual economic activity in the nation.
     
  18. Godless-Kafir

    Godless-Kafir DFI Buddha Senior Member

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    Who made this Video? If it was you then great work on editing. :D
     
    Last edited by a moderator: May 10, 2015

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