India Now a Trillion-Dollar Economy

It’s finally official. India is indeed a trillion dollar economy.

The Economic Survey released on Thursday said the country’s gross domestic product (GDP) for 2007-08 would be the equivalent of $1.16 trillion calculated at the average dollar-rupee exchange rate for the year.

In rupee terms, the Central Statistical Organisation has projected GDP at market prices in the current year to reach just a tad under Rs 47,00,000 crore.

That also means that India’s per capita GDP figure will for the first time cross the $1,000 mark to reach $1,021. In a rather candid remark, the Survey went on to add that at this level India would still remain a low income country going by the World Bank’s classification of countries as high-, medium- and low-income.

Interestingly, while acknowledging that a better indicator of the relative size of economies is their measure by the purchasing power parity (PPP) method — which calculates conversion rates for currencies based on how much a unit of each of them can buy in the local economy — the survey was ambivalent about the latest estimates made by the World Bank using this method.

“There are, however, practical difficulties in deriving GDP at PPP, and we now have two different estimates of the PPP conversion factor for 2005. India’s GDP at PPP is estimated at $ 5.16 trillion or $ 3.19 trillion depending on whether the old or new conversion factor is used,” it said.

While the World Bank itself has moved to the new estimates, it is understandable that India is not too keen on embracing them.

For, as the survey itself noted, the new measure would mean that India is only the fifth largest economy in the world behind the US, China, Japan and Germany, while the earlier estimates made it the third largest, ahead of Japan and Germany.

Via the Times of India