Opinion

PPP, paranthas and the GDP race

Aarati Krishnan | Updated on July 12, 2018 Published on July 12, 2018

Chotu was in a very good mood that afternoon when Motu bumped into him at Lucky Dhaba. Arrey come Motu, let me treat you to Aloo Parantha and Malai Lassi, he invited.

What’s the occasion, Chotu, koi promotion mila hai kya?

It’s not me who got the promotion. Didn’t you see that India has overtaken France to become the sixth largest economy in the world? The World Bank’s 2017 rankings are just out.

Hain! I thought I read India had overtaken China long ago?

Motu, where do you get such news? You are confusing the growth rate with size. It is the growth rate of India’s GDP that is higher right now. The IMF had predicted that India’s GDP growth in 2018 will be 7.4 per cent, while China’s will be 6.6 per cent. But if you talk of the size of the economy, India’s GDP has just hit $2.59 trillion in 2017, while China’s was $12.2 trillion.

Oh, so China is a haathi and India has become a billi from a chuha. Then what’s the good news?

Well, at $2.59 trillion, India is now bigger than France which is at $2.58 trillion. We are also within touching distance of our old colonial ruler UK, which is at $2.62 trillion. Chances are that we will overtake them next year.

But Chotu, if India is overtaking such rich countries, how come I don’t feel rich? I still have only four zeros in my salary. Isn’t GDP supposed to count the income of common people?

Sometimes you ask very clever questions Motu. You see, while India is overtaking rich countries on total GDP, it is still a ‘lower-middle income’ country if you take the income made by the average person. World Bank data say our per capita income is $1,820, and we rank 144th in the world on this. Even Bhutan at $2,720, Swaziland at $2,960 and Sri Lanka at $3,840 are far richer than us. France is at $37,970 and UK $40,530.

Must be our huge population na, Chotu. Bhutan vagera are such tiny countries.

Yes, but there’s some good news. India used to be a ‘low income’ country, as per World Bank not so long ago, but has joined the league of ‘middle income’ nations recently, because its per capita income crossed $996. India is growing at nearly twice the rate of global GDP, so we are gaining in this race. Did you know that India has more than doubled its GDP from $1.2 trillion in just 10 years? Woh bhi in dollars.

But the rupee has fallen so much against the dollar na. So that must be making our GDP look small.

The lassi is making you very smart Motu. Yes, in rupees, India’s per capita income has trebled from ₹40,000 to ₹1.25 lakh in 10 years. But because global agencies measure everything in US dollars, countries like India whose currencies have been falling against the dollar lose out. But to adjust for this, World Bank uses something called PPP or Purchasing Power Parity.

Woh kya cheez hai, Chotu?

See if you can buy two paranthas for ₹30 in India and they cost $2 in the US, that is ₹138. It means that we people have more than four times the purchasing power of our US-based cousins. India ranks 123rd on PPP-based per capita income.

That’s not so great. We need to reduce population.

There are other ways, Motu. If we can create more jobs for our increasing number of young people, get more women to work or even increase productivity of our workers, we’ll run faster in this race.

Abhi I’ve got to run and improve my productivity, Chotu. This has been a very long lunch break.

Published on July 12, 2018
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