India is now over 2 trillion dollar economy

[Mad Indian]

Not really. Both serve different functions.
PPP is good when you want to account for difference in input/ living costs
e.g. GDP(PPP) is good when you want to measure and compare the size of e.g. Vegetable market in say Europe and India.
GDP(Nominal) is good when you want to compare financial strength between say US and China or India and PAK.
Apples to oranges.

Name the uses of nominal GDP measure which are exclusive to nominal GDP measure or better than PPP measure.

 

[Varahamihira]

PPP 7.5tn $. I have not read that anywhere pls give links. Will like to read it


. Reg nominal 2.3tn $. Again I don't think it is relevant. It won't be even if it becomes 100tn $ when PPP remains at 6-7tn$

I saw on some western twitter handle may be PEW don't remember now.

But here is a wikipedia link and it's referring to IMF though it showing around $7.3 trillion.
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

 

[Rowdy]

Name the uses of nominal GDP measure which are exclusive to nominal GDP measure or better than PPP measure.

When you buy oil you pay in HARD dollars ... measured in Nominal GDP.

 

[LalTopi]

Not really. Both serve different functions.
PPP is good when you want to account for difference in input/ living costs
e.g. GDP(PPP) is good when you want to measure and compare the size of e.g. Vegetable market in say Europe and India.
GDP(Nominal) is good when you want to compare financial strength between say US and China or India and PAK.
Apples to oranges.

Yep. When you want to compare standard of living your $7.5tr PPP (or whatever the number is) provides the best comparison. But when you need to import goods you can only buy Rafales, Poseidons, Oil etc. with your $2.3 nominal. Hence India really needs Make In India to work.

 

[jouni]

I do not get you fixation to nominal country GDP. With that logic our GDP is 18.5 Trillion dollars us being an EU country. The only thing that matters is the per person figure. When that is up to a certain level you can start to build instead of just surviving....

 

[Mad Indian]

I saw on some western twitter handle may be PEW don't remember now.

But here is a wikipedia link and it's referring to IMF though it showing around $7.3 trillion.
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

Ok. Thanks. I think I forgot the recent data and was hung up on 5.5tn $ which was the measure 2yrs back.

 

[Mad Indian]

When you buy oil you pay in HARD dollars ... measured in Nominal GDP.

And when you sell your products it again earns back the hard cash. So the nominal GDP is has a very minimal impact on nation's economics compared to PPP. That's why I consider it largely irrelevant. For example Indian trade imbalance is at 100bn$ (not accounting for the indirect wealth generated by investments and remittances) which is nothing compared to overall economic power of India.

 

[abhi_the _gr8_maratha]

in international market nominal gdp matters and indian imports are more than export so we should consider nominal gdp

 

[Mad Indian]

Yep. When you want to compare standard of living your $7.5tr PPP (or whatever the number is) provides the best comparison. But when you need to import goods you can only buy Rafales, Poseidons, Oil etc. with your $2.3 nominal. Hence India really needs Make In India to work.

That's assuming that we will always import and won't export, and that there won't be any domestic industry to back up the exports. And even for make in india the investment calculations make a lot more sense with PPP than with nominal. For instance when you invest 1bn nominal $, what you are actually investing is 3bn actual worth of $

 

[Mad Indian]

in international market nominal gdp matters and indian imports are more than export so we should consider nominal gdp

And after adjusting for Indian remittances and investments India will have a trade balance and in fact a small surplus. So how does nominal GDP matter here?

 

[Mad Indian]

Look guys money is only worth what services/goods it can actually buy. So that's why nominal GDP which is a measure of just how much cash you have is useless compared with the measure of what amount of services you can afford with said cash. Which is why PPP calculation is always better for comparing economies. This is the same flawed understanding which makes people think that exports are inherently good and imports are inherently bad to the economy.

 

[abhi_the _gr8_maratha]

And after adjusting for Indian remittances and investments India will have a trade balance and in fact a small surplus. So how does nominal GDP matter here?

on
.
does the gap is huge? No.... India just have just some 355 billion dollar in forex while indian export of a month is some 500 billion which is less than one year of indian import and on other hand indian export is decreasing

 

[Mad Indian]

on
.
does the gap is huge? No.... India just have just some 355 billion dollar in forex while indian export of a month is some 500 billion which is less than one year of indian import and on other hand indian export is decreasing

don't throw around words which you don't understand. What does forex have to do with imports?

Is Indian govt(which holds the forex) going to import from countries? No . forex is for gtg transactions and govt expenditures and nothing more. Imports and exports are mostly private concerns of private citizens. It has no bearing directly on forex.

And did you account for the indirect sources of revenues like remittance (which account for 80bn$) and investments in India which are also part of the national income.

For ex. Let's say I am living in UK and earn 10k Rupees. I send back 5k Rupees to my home . now my home imports/buy from foreign country(even uk) for about 3k Rupees. Now the Indian imports in my family case is 3k Rupees and export is 0 Rupees. Does that mean Indian govt is losing 3k Rupees because of my family imports?

Nominal is a crude way of measuring economies. Nothing more and nothing less. Ppp is a better and more refined way of measuring the same. Nothing more and nothing less

 

[Mad Indian]

And guys , most of the work outsourced here to our IT companies don't count towards our exports. That's why the claim that India has trade imbalance and should have a stronger rupee is total bonkers


And of course there are several incomes which are actually exports which are not counted as exports - medical tourism , tourism in general , profits generated by Indian companies which have invested in foreign countries etc

 

[Rowdy]

And when you sell your products it again earns back the hard cash. So the nominal GDP is has a very minimal impact on nation's economics compared to PPP. That's why I consider it largely irrelevant. For example Indian trade imbalance is at 100bn$ (not accounting for the indirect wealth generated by investments and remittances) which is nothing compared to overall economic power of India.

Both are different and have their own utility.

 

[Rowdy]

I do not get you fixation to nominal country GDP. With that logic our GDP is 18.5 Trillion dollars us being an EU country. The only thing that matters is the per person figure. When that is up to a certain level you can start to build instead of just surviving....

Yup .
The best measure for prosperity is GDP Nominal Per person.

 

[Mad Indian]

Both are different and have their own utility.

No they don't. Nominal GDP measure is useless compared to PPP measure

As I asked, give me example where nominal measure of GDP provides a better assessment of economics than PPP economic measure

 

[Mad Indian]

Yup .
The best measure for prosperity is GDP Nominal Per person.

I am pretty sure you won't learn even if some economist comes and claims otherwise so you can believe in whatever you want.

 

[Rowdy]

No they don't. Nominal GDP measure is useless compared to PPP measure

As I asked, give me example where nominal measure of GDP provides a better assessment of economics than PPP economic measure

GDP (PPP) is calculated by GDP(local currency)*x*y
where x= 1/(exchange rate)
und y= some multiplication factor.
Now what is y
suppose a bag of rice costs 50 Rs in india but 2 € in Germany.
Now direct conversion gives the costs respectively as 50 Rs and 2*70 = 140 Rs. So does rice bag cost double in germany ???? or conversly must a german work double to earn a bag of rice?
Not really. Here depending on the cost of living & the cost of essentials a factor y will be calculated that will make these costs similar.
So assume the factor is 5 (i.e. I can have the same standard of living in India with a one fifth salary(in doller terms) i.e. I will work for 200$ but an american IN AMERICA will do the same in 1000$ )
Advantages:-
Good for comparing markets and Human Development and their moneys strength IN ITS OWN MARKET)
Now,
India goes to the oil market and wants to buy a barrel of Oil. It needs 53$ as of today.
Here you will have to shell out 53*63(exchange rate) = 3393 Rs .... you can slap that PPP in the face of that arab sheikh but it wont help ya one bit.
Same if you go on a trip to US. All that PPP will be like thin air

 

[Rowdy]

I am pretty sure you won't learn even if some economist comes and claims otherwise so you can believe in whatever you want.

GDP Nominal per person is THE ULTIMATE measure of prosperity.
@jouni please explain to this 'fellow' ...