PPP GDP list of countries for the year 2011 released by the International Monetary Fund (IMF) on April 17, 2012 with World Economic Outlook 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.
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. PPP methods help adjust income to prices for a meaningful comparison on quality of life in countries with widely different prices and incomes.
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. 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.
The BRICS nations dominate the top 10 positions with Brazil at position 7, Russia at 6, India at 3 and China at 2. South Africa is positioned at 25.
India will, however, continue to lag behind when it comes to matching living standards of its population with more developed western and Asian economies. Nevertheless, India’s move up the league table was a reminder of the boundless potential the country offered. It is also estimated that India will consolidate its position in the coming years.