Indian Economy Reaches Over 50% of US Size in PPP Terms
The Indian economy has reached a significant milestone, with its size in Purchasing Power Parity (PPP) terms estimated at $15 trillion, according to Suman Bery, Vice-Chairman of NITI Aayog. This figure represents more than half of the United States’ economy, which stands at $29 trillion. Bery emphasized that while India’s Gross Domestic Product (GDP) at market prices is $4 trillion, the PPP calculation offers a more accurate reflection of economic productivity. He made these remarks during the Confederation of Indian Industry’s Annual Business Summit 2025, highlighting the importance of understanding economic metrics beyond market prices.
Understanding Purchasing Power Parity
Purchasing Power Parity (PPP) is a crucial economic concept that compares the relative value of currencies based on their purchasing power. It indicates how many currency units are needed to buy the same basket of goods and services in different countries. Bery pointed out that measuring economies through PPP provides a clearer picture of productivity and living standards. He noted that while India is often cited as the fourth largest economy based on market prices, PPP offers a more comprehensive view of economic performance. This perspective is particularly valuable for economists who seek to compare labor productivity across nations, especially against the backdrop of the United States.
Challenges in Labor Productivity
Bery highlighted a pressing issue: India’s labor productivity ranks among the lowest in the G20 nations. He stressed that improving this metric is essential for leveraging the country’s demographic advantages. Despite a consistent average growth rate of 6.5% from 1991 until the COVID-19 pandemic, the lack of significant gains in labor productivity has led to a growing preference for government employment among the populace. Bery acknowledged that while India’s growth trajectory has been commendable, there is a pressing need for improvement in productivity to sustain economic momentum and enhance real incomes.
Strategies for Economic Growth
To bolster economic growth, Bery urged the need for India to diversify its supply sources and reduce dependency on specific suppliers. He advocated for harnessing global expertise while fostering local innovations. Additionally, he emphasized the importance of market reforms and skill development initiatives to enhance competitiveness in both manufacturing and services sectors. Bery also encouraged states to capitalize on Free Trade Agreements (FTAs) established by the central government, which can provide new opportunities for growth and expansion.
Learning from Global Examples
Bery identified industrialization as a significant challenge for India, suggesting that while the country should develop its unique approach, it can benefit from the experiences of other nations. He pointed to the successful industrialization strategies of countries like China, Japan, and South Korea as valuable lessons. By learning from these examples, India can enhance its industrial capabilities and address the challenges it faces in achieving sustainable economic growth. Bery concluded by emphasizing the need for continuous improvement and innovation to ensure that India remains competitive in the global economy.
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