GDPs

HAS CHINA SURPASSED US IN GDP?

Rukmini Shrinivasan

The Times of India, January 21, 2011

NEW DELHI: Did China overtake the US as the world's biggest economy in 2010? New numbers for the GDP of different countries at purchasing power parity (PPP) seem to suggest so. They also suggest India's economy is significantly bigger than previously thought.

While market exchange rates have traditionally formed the basis for comparison of GDP across countries , this method increasingly came under criticism as it did not take into account the differential costs of goods and services in countries at different levels of development. As a result, the idea of PPP, in which the prices of a basket of goods and services forms the basis of comparison, came into being. While various agencies, including the IMF, calculate GDP at PPP, the Penn World Tables brought out by the Center for International Comparisons at the University of Pennsylvania (CICUP) since 1970 have come to be regarded among economists as the definitive source.

The yet-to-be-released latest version of the Penn World Tables corrects for biases in past measurements , such as the collection of only urban prices in China, which resulted in China's GDP being understated . Factoring in these corrections has resulted in China's GDP at PPP being revised upwards by 27% and India's by 13% for the year 2005, CICUP data made available to TOI show.

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