Arvind Subramanian said that a more appropriate base is GDP at constant prices and purchasing power parity (PPP) exchange rates, showing India ahead. (Image from Bloomberg)
Former chief economic adviser Arvind Subramanian said we should measure real GDP in local currency after taking out the effects of inflation and then convert all estimates of real GDP in local currency to comparable dollars. Arvind Subramanian added that the IMF’s conclusion that Bangladesh outshines India is based on comparisons based on GDP measured at current prices and market exchange rates. However, market exchange rates are not appropriate for welfare comparisons across time and across countries because they may not adequately reflect domestic inflation or productivity growth, he added.
The prominent economist stressed that a more appropriate base is GDP at constant prices and purchasing power parity (PPP) exchange rates, which shows India ahead and despite the adverse impact of Covid in 2020, it is likely that continue to be so. It should be noted that recent comparative analysis showed that Bangladesh is set to surpass India in terms of gross domestic product (GDP) per capita this calendar year.
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Arvind Subramanian also said that wrong numbers are being compared and that the additional GDP per capita is an estimate for one indicator of the average standard of living in a country, while there are many others, such as the Human Development Index. He noted that the IMF’s historical figures are based on countries’ local currency GDP estimates, which are subject to uncertainty for both India and Bangladesh.
However, the former chief economic adviser noted that the impact of Covid has had a major impact on the Indian economy and that India will return to the pre-Covid level of real GDP per capita in 2022 alone, which means that the country has lost 3 years of growth. Meanwhile, appreciating Bangladesh’s economic performance, Arvind Subramanian said that Bangladesh’s performance over the past two decades in growth, manufacturing exports, and a variety of social indicators such as fertility, female labor force participation, financial inclusion has been remarkable and the country is a miracle in the making, offering development lessons for all.
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