Purchasing Power Parities and the size of Indian Economy

  • Category
    Economy
  • Published
    1st Jul, 2020

The World Bank has released new Purchasing Power Parities (PPPs) for reference year 2017, under International Comparison Program (ICP), that adjust for differences in the cost of living across economies of the World. Globally 176 economies participated in 2017 cycle of ICP.

Context

The World Bank has released new Purchasing Power Parities (PPPs) for reference year 2017, under International Comparison Program (ICP), that adjust for differences in the cost of living across economies of the World. Globally 176 economies participated in 2017 cycle of ICP.

About

  • The International Comparison Program (ICP) is the largest worldwide data-collection initiative, under the guidance of UN Statistical Commission (UNSC), with the goal of producing Purchasing Power Parities (PPPs) which are vital for converting measures of economic activities to be comparable across economies.
  • Along with the PPPs, the ICP also produces Price Level Indices (PLI) and other regionally comparable aggregates of GDP expenditure.
  • India has participated in almost all ICP rounds since its inception in 1970.
  • The Ministry of Statistics and Programme Implementation is National Implementing Agency (NIA) for India, which has the responsibility of planning, coordinating and implementing national ICP activities.
  • India is also proud to have been a co-Chair of the ICP Governing Board along with Statistics Austria for the ICP 2017 cycle.
  • The next ICP comparison will be conducted for the reference year 2021.

What is Purchasing power parity?

  • Purchasing power parity is used worldwide to compare the income levels in different countries. PPP thus makes it easy to understand and interpret the data of each country.
  • Purchasing power parity (PPP) is an economic theory of exchange rate determination.
  • It states that the price levels between two countries should be equal.
  • PPP measures are widely used by global institutions, such as the World Bank, United Nations, International Monetary Fund and European Union.

Worldwide status

Results from the 2017 International Comparison Program are as given below

  • The Purchasing Power Parities (PPPs) of Indian Rupee per US$ at Gross Domestic Product (GDP) level is now 20.65 in 2017 from 15.55 in 2011.
  • The Exchange Rate of US Dollar to Indian Rupee is now 65.12 from 46.67 during same period.
  • The Price Level Index (PLI)—the ratio of a PPP to its corresponding market exchange rate—is used to compare the price levels of economies, of India is 47.55 in 2017 from 42.99 in 2011.
  • In 2017, India retained and consolidated its global position, as the third largesteconomy, accounted for 6.7 percent ($8,051 billion out of World total of $119,547 billion) of global Gross Domestic Product (GDP) in terms of PPPs as against China (16.4%) and United States (16.3%), respectively. 
  • India is also third largest economy in terms of its PPP-based share in global Actual Individual Consumption and Global Gross Capital Formation.

 

X
History Webinar

© 2020 Basix Education Pvt. Ltd. All Rights Reserved