The Hindu: Published on 2nd June 2025:
Why in News:
India is projected by the IMF to become the world’s fourth largest economy in 2025, overtaking Japan in terms of GDP at market exchange rates, which has stirred political and media discussions.
Background:
India has been ranked 5th in GDP size since 2021 (at market exchange rates).
Discussions on GDP rankings have often ignored deeper economic and social indicators such as inequality, health, education, and employment quality.
There are two main methods of comparing GDPs:
a) Market Exchange Rates
b) Purchasing Power Parity (PPP)
Key Issues:
GDP size ≠ well-being: A large economy does not necessarily mean higher per capita income or better living standards.
PPP vs Market Exchange Rate:
PPP gives a more accurate picture of people’s purchasing power.
India has been the 3rd largest economy by PPP since 2009, but remains much lower in per capita terms.
Political Narrative: Government chooses to highlight GDP rankings by market exchange rates, as it suits their political messaging.
Data Misrepresentation: Confusion created by celebrating large GDP in absolute terms while ignoring inequality and poverty.
Current Status (2024-2025):
India's GDP (Market Rate): $4.18 trillion (ahead of Japan).
India’s Rank (Market Rate): Projected to be 4th in 2025.
India’s GDP (PPP): Already 3rd since 2009.
Per Capita GDP:
India: $2,711
Vietnam: $4,536
Sri Lanka: $4,325
Bhutan: $3,913
India’s global rank: 144th (market rate), 127th (PPP)
Critical Analysis:
The focus on aggregate GDP hides deeper social and economic issues such as unemployment, underemployment, and lack of access to services.
India has a large informal sector and a low wage base, inflating PPP figures artificially.
"Big Economy Illusion": A large GDP does not necessarily translate into development or welfare.
Impact and Implications:
Risk of policy complacency if focus stays only on GDP size.
Need to shift towards multi-dimensional indicators for development — health, education, employment quality, gender equity.
Misleading economic narrative could affect policy direction and global perception.
Way Forward: