Is India really the fastest growing major economy?

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October 9, 2015

Whether India is the fastest growing economy or not depends a lot on the measuring rod you use. It’s true that when we look at percentage growth rates, India is growing the fastest among the larger economies.

October 9, 2015

Whether India is the fastest growing economy or not depends a lot on the measuring rod you use. It’s true that when we look at percentage growth rates, India is growing the fastest among the larger economies.

According to the International Monetary Fund’s (IMF’s) World Economic Outlook published this week, the Indian economy is expected to grow by 7.3% this year, China by 6.8% and the US by 2.6%.

But India’s higher growth is due to a lower base—while India is a $2 trillion economy, China is worth $10 trillion and the US $17 trillion. So the increase in gross domestic product (GDP) in India in absolute numbers is actually much smaller than the increase in GDP in China.

Chart 1 shows the increase in GDP, in current US dollars, in India, China and the US in 2015 and 2016.

The numbers are from IMF database. Note that the increase in India’s GDP in 2015, in terms of this yardstick, is 13% of China’s and a fifth of the increase in the US GDP this year.

If we take GDP in purchasing power parity (PPP) terms, at current international dollars, the picture (chart 2) changes substantially. This yardstick shows US GDP rising only a little more than India’s. But China’s GDP growth is still more than double India’s.

Finally, chart 3 shows the share of GDP in PPP terms of India, China and the US. The US share has been falling for several years and while India’s share is rising, so is China’s


Courtesy: LiveMint

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