India Becomes World’s Sixth-Largest Economy In Terms Of GDP: Know What It Means
Pushing France to the seventh place, India has become the world’s sixth-largest economy in terms of Gross Domestic Product (GDP), according to the updated World Bank figures for the year 2017. India’s GDP was $2.597 trillion at the end of 2017 as compared to France’s $2.582 trillion in the same year. The five economies ahead of us are United States, China, Japan, Germany and the United Kingdom.
Even though the country’s economic growth experienced a slowdown after the introduction of a few new economic policies, it soon picked up the pace from July 2017 onwards. According to Hindustan Times, both the World Bank and the International Monetary Fund (IMF) in their respective reports have stated that India has finally overcome the adverse effects of the new policies.
Nominal GDP, GDP Per Capita, and GDP PPP (Purchasing Power Parity)
GDP is defined as the total value of goods or services produced within a country’s borders in a specific time. GDP is nothing but the total output of the economy of a country in a year. It can thus be an accurate measure of the nation’s income, expenditure or output. Nominal GDP does not take into account the differences in the cost of living in different countries, and hence the results may vary depending upon the currency exchange rates. The rankings might change, even though they make little or no difference to the standard of living of the country’s population.
However, GDP per capita, in short, is GDP divided by the population of that country. It can roughly convey the standard of living in a country. This is a useful tool when one is comparing a country with another. According to the World Bank’s 2017 data, India’s GDP per capita income is $1,940.
GDP, when calculated in terms of purchasing-power-parity (PPP), is better equipped as compared to nominal GDP. Nominal GDP does not take into consideration the relative cost of local goods, services and inflation rates of the country and uses international market exchange rates which may distort the real differences in per capita income. GDP PPP brings the cost of living in the analysis. If a country has high GDP (Nominal or Per Capita) but the cost of living in that country is very high, then the country might be ranked at a lower position as compared to a country with medium GDP (Nominal or Per Capita) but with a very low cost of living. India, in this regard, ranks third, only after giants like US and China.
Understanding what the World Bank report really means
Yes, India has surpassed a developed European country like France and has successfully captured the sixth spot. However, there is more to it than what meets the eye. With a population of roughly 135 crores, India is only second to China, a country which has successfully reduced its pace of population growth.
Apart from China, who is above India in the World Bank’s GDP list, all the other countries have a population which is lesser than half of ours. For example, the USA’s population is only 32.57 crores.
Increase in GDP means that a country has increased the amount that it has been producing. However, it misses the mark from the perspective of a citizen who has to deal with day to day realities of life. As France has a population of 6.69 crores, its GDP per capita income, according to 2016 figures is $36,854. This means that the French have a higher per capita income and standards of living when compared to India’s dismal GDP per capita of $1,940.
Over the past 50-odd years, India’s GDP per capita income has increased from $81.3 (Rs 1,705) in 1960 to $1,940 (Rs 1,33,384.70) in 2016. Not only is this growth slower than countries like China, South Korea, Malaysia and Brazil, but is behind many other smaller and less-developed nations as well.