China will become world’s largest economy, this year.
By Deepak Chitnis
WASHINGTON, DC: A new report by the World Bank shows that China is all but guaranteed to surpass the US this year as the world’s largest economy, currently just a hair’s breadth away from claiming the top spot, while India stands at a solid third place.
The study, put together under the World Bank’s International Comparison Program, analyzed the Purchasing Power Parity (PPP) of various nations. By using PPP, says the report, researchers were allowed to essentially equalize the disparate currencies of the countries that were studied, and compare “size and price levels of economies around the world.”
The numbers, all of which are from 2011, show that China’s overall GDP was 87% of that of the US, more than double the 43% that Chinese GDP was in relation to the US in 2005. India experienced similar growth, jumping from 19% of US GDP in 2005 to 37% in 2011; in the process, India vaulted from the tenth-largest world economy to the third-largest in the span of just six years.
But given the rate at which China has grown, which is astronomical by any standard, the World Bank surmises that the eastern superpower will overtake the US in economic size at some point this year itself. China’s economy has continued to grow at an accelerated rate, increasing by 7.7% in the last quarter of 2013 and falling only slightly to 7.4% in the first quarter of this year, according to Reuters. The US, meanwhile, only grew 0.1% in the first quarter of 2014.
In terms of the total world GDP, the US accounted for about 17.1% of it in 2011. China followed closely with 14.9%, and India was third with just 6.4%. The rest of the top 12, according to the report, were Japan (4.8%), Germany (3.7%), the Russian Federation (3.5%), Brazil (3.1%), France (2.6%), the UK (2.4%), Indonesia (2.3%), Italy (2.3%), and Mexico (2.1%). The same order holds when examining the countries in terms of their percentage of the US GDP, albeit with different percentages.
However, of those nations, India is the one with the highest index of GDP per capita (when examined via PPP), at 127. To put that number in perspective, Indonesia comes in at second place with 107, while China has 99, Brazil has 80, Mexico has 72, and the US is actually in last place of the top 12 nations, with an index of 12.
India’s Price Level Index (PLI), however, was ranked 171. PLI is used as a way to assess the cost of living in a location, with a base score of 100; anything higher than that is considered relatively expensive, and anything lower is considered reasonably affordable. India’s PLI ranked 41.7 on the world scale, and 32.4 when compared directly to the US.
For comparison’s sake, Pakistan ranked 176, and scored 36.4 on the world scale and 28.2 on the US scale, meaning that the two south Asian nations are considered among the most affordable and cost-effective places to live. According to the report, the most expensive place to live is Switzerland (209.6 world, 162.6 US), followed by Norway, Bermuda, Australia, and Denmark.
The six largest middle-income economies – China, India, Russia, Brazil, Indonesia, and Mexico – constituted just over 32% of the world’s total GDP in 2011, which was just shy of the 33% accounted for by the world’s six high-income economies (the US, Japan, Germany, France, the UK, and Italy). In total, these 12 nations were responsible for more than half of the world’s total GDP in 2011.
1 Comment
Statistics is misleading. India has a long way to go. Indian government needs to improve the governance and educate the poor. Also stop the red tape. India’s millions of entrepreneurs are her real strength.