The World Bank recently released the latest Purchasing Power Parities (PPPs) for the reference year 2017. This is a part of the International Comparison Program (ICP), an initiative that accounts for the variations in cost of living across different global economies.
Significance and Role of the International Comparison Program
The United Nations Statistical Commission (UNSC) supervises the ICP, which is globally the most extensive data-collection initiative. The ICP aims to develop PPPs and comparable Price Level Indices (PLIs) for participating economies, and to adjust the volume and per-capita measures of Gross Domestic Product (GDP) and its expenditure elements into a common currency using PPPs.
Concept and Purpose of Purchasing Power Parities
A PPP is essentially the rate at which one country’s currency would need to be converted into another’s to purchase an equivalent amount of goods and services in both nations. The construction of PPP exchange rates ensures equivalent pricing of the same quantity of goods and services across differing countries. These rates help in converting national poverty lines from some of the world’s poorest countries, ultimately determining the Global Poverty Line.
India’s Participation In the International Comparison Program
India, along with Statistics Austria, acts as a co-chair of the ICP Governing Board for the 2017 cycle. Having participated in almost all ICP rounds since its inception in 1970, India continues to play a significant role. The Ministry of Statistics and Programme Implementation takes on the role of planning, coordinating, and implementing national ICP activities as the National Implementing Agency (NIA) for India.
Results, Estimates, and Future Plans of the ICP
The revised results for 2011, the ICP 2017 results, and the annual PPP estimates for 2012-2016 are all accessible on the ICP website and the World Bank’s Databank and Data Catalog. Plans for the subsequent ICP comparison are already underway for the reference year 2021.
Global Status: India’s Position in Global Economy
In the 2017 cycle of ICP, 176 economies participated globally. India maintained its position as the third-largest economy, contributing to 6.7% of global GDP in terms of PPPs. India comes after China, contributing 16.4%, and USA comes second with 16.3%.
Regional Status: India’s Standing in the Asia-Pacific Market
In the Asia-Pacific region, 22 economies participated. With 50.76%, China is the largest economy in this region, followed by India accounting for 20.83% of Regional GDP in terms of PPPs.
Actual Individual Consumption and Gross Fixed Capital Formation
Actual Individual Consumption (AIC) includes goods and services actually consumed by individuals, regardless of who pays for them. Gross Fixed Capital Formation (GFCF), on the other hand, refers to the net increase in physical assets, taking into account investment and disposals but excluding financial assets, stock of inventories, and other operating costs.
In both AIC and GFCF, India holds a substantial share, emerging as the third-largest economy globally and the second-largest in the Asia-Pacific region.
