In 2023, India recorded a GDP of 288.13 trillion rupees, which is about $3.49 trillion at exchange rates, a figure that makes the "Asian elephant" surpass the United Kingdom again after 2022 to rank fifth in the world, and there are only four countries with a higher total GDP than India, namely the United States, China, Germany and Japan.
Considering that Germany and Japan both have combined GDP of between $4 and $5 trillion, and that India can continue to grow at a high rate as a developing country, it is only a matter of time before India surpasses the two largest Western economies outside the United States, and it will not be long before it becomes the world's third-largest economy within five years.
Modi's ambition to make India one of the most important countries in the world is not impossible from an economic point of view, and with his intention to apply for the sixth permanent seat of the United Nations, he has to admit that India's national power and status are constantly strengthening.
Perhaps it is true that some achievements have been made in recent years, and some Indian officials have floated, with RBI Deputy Governor Patra saying on March 30 that India's GDP could grow by 10% over the next decade, with India becoming the world's second-largest economy by 2032 and the world's highest GDP by 2050.
This remark can be described as groundbreaking, completely ignoring China and the United States, and floating a little too much.
In 2023, the nominal GDP of the United States will be 27.4 trillion US dollars and China's 17.9 trillion US dollars, which are 7.85 times and 5.13 times that of India, respectively.
Even if India can maintain an economic growth rate of 10% for a long time, and India's nominal GDP will be roughly 8.2 trillion US dollars by 2032, let's "add strength" to India, assuming an annual growth rate of 12% in the next ten years, the nominal GDP in 2032 can reach 9.7 trillion US dollars.
Whether calculated according to the growth rate of 10% or 12%, India's nominal GDP in eight years is still far from the level of China and the United States in 2023, and the GDP of China and the United States will also grow in the next eight years. In China, for example, the average nominal growth rate over the next few years is conservatively estimated to be 4%, and by 2032, China's nominal GDP will be $25.5 trillion, 2-3 times that of India.
As the deputy governor of the Reserve Bank of India, he should be very sensitive to numbers, so why would he say such arrogant and ignorant words? Even if it is to arouse enthusiasm for active economic development in India and boost the confidence of the whole people.
When things go wrong, there must be a demon, and it seems to me that Borat may have adopted a different set of GDP accounting methods. Note that I'm not joking, or ironicing India's practice of including cow dung in GDP, but that there is an alternative GDP accounting methodology that is endorsed by the World Bank.
In general, the GDP accounting method used is the exchange rate method, which first uses the national currency to calculate the total GDP of the whole year, and then converts it into US dollars according to the average exchange rate of the year. Taking India's situation in 2023 as an example, the annual realization is 288.13 trillion rupees, which translates to 3.49 trillion yuan in US dollars.
In addition to the exchange rate method, there is also a GDP accounting method based on the PPP theory, called the purchasing power parity method. The general principle of this approach is that GDP will be calculated at purchasing power parity using the weighted average of domestic commodity prices and the ratio of the same commodity prices in the benchmark country.
The advantage of having a PPP method to account for GDP is that it is not subject to exchange rate fluctuations, but the disadvantage is that it is very complex and difficult to determine the PPP parameters for countries around the world.
The World Bank has only published the GDP figures for 2022 under the PPP method, as shown in the figure below.
As can be seen from the chart above, China's GDP in 2022 is $30.33 trillion, the United States is $25.46 trillion, and India has ranked third with $11.87 trillion.
Not only did India surpass Germany and Japan the year before last, but its total GDP reached 46% of that of the United States. Based on purchasing power parity GDP in 2022, India's economy is expected to grow at an average annual rate of 10% and reach nearly $31 trillion in 2032, surpassing the United States to become the world's second-largest economy.
At the same time, if India can maintain its high growth rate until 2050, it is not impossible for GDP to become the number one under the purchasing power parity method.
However, Patra overlooked the fact that GDP figures under the purchasing power parity method are not well recognized internationally. The reason for this is related to the shortcomings of this method of accounting, which is a very difficult and almost impossible task to determine a reasonable PPP factor, since there is a huge difference in the quality of the same commodity and the same service, and it is obviously unreasonable to measure it by the same price coefficient.
This is the reason why the exchange rate method, although it has certain flaws, has always been the main method used by countries and international organizations to measure a country's GDP. Under the exchange rate approach, it is difficult for India to surpass either of the two major powers in China and the United States to become one of the world's top two economies within 30 years.
Of course, what is certain is that no matter how GDP is calculated, India is the world's major economy with the greatest potential for growth in the next 20 years. India's economic potential comes from two parts.
First, the base is low, India's current per capita GDP is less than about 2,500 US dollars, only one-fifth of China's, 33rd of the United States, a low base means that there is more room for upward movement, far from the middle-income trap that may fall into.
The second is the population advantage, India's total population is not only the world's first (the gap with China will widen in the future), the population structure is reasonable, more than 1 billion people in the young and middle-aged proportion of young people under the age of 40 is high, young people are not only rich in productivity but also the main force of consumption, population plays a vital role in promoting the sustainable development of a country's economy.
Therefore, we must not ignore India's impact on the global economy, and at the same time develop ourselves and be prepared to confront India head-on in many fields and industries in the future, and more and more Indian companies will become competitors in the global strategy of Chinese enterprises. Remember, knowing yourself and knowing the other side can survive a hundred battles.