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Indian Purchasing Power Parity to overtake Japan by 2025

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At current growth rate, India’s Purchasing Power Parity (PPP) is set to overtake Japan by 2025 to rank third only after US and China. This prediction came from none other than Governor of BoJ (Bank of Japan), Toshihiko Fukui.

Incase, you are not clear of what PPP is, here is the excerpt from Wikipedia.

A purchasing power parity exchange rate equalizes the purchasing power of different currencies in their home countries for a given basket of goods. These special exchange rates are often used to compare the standards of living of two or more countries. The adjustments are meant to give a better picture than comparing gross domestic products (GDP) using market exchange rates. This type of adjustment to an exchange rate is controversial because of the difficulties of finding comparable baskets of goods to compare purchasing power across countries.

In plain simple English, it is the purchasing power of country, after neutralizing the currency to global standards, thusIndian Economic Growth to overtake Japan by 2025 giving a more correct picture of the country’s purchasing power.

There are surely a couple of things that India has to watch to reach the goal, one, it has to loosen the restrictions on capital flow and two, develop bond markets to further integrate itself to global economy.

  1. […] trend, any such incremental income goes into enjoying the luxuries of the life – coupled by higher purchasing power and availability of more choices to make you habituated to […]

  2. Chandra says

    It also includes the added cost in accquiring crude oil at a devalued currency. Since crude is the driving force in any economy. Wonder why petrol is so expensive in India even more expensive than in Europe and America, the middle east is only few hours from Bombay.

    Wish we had a bigger and stronger Navy to negotiate oil price like NATO does.

  3. N.K.Dashora says

    The purchasing power parity comparisions should be dynamic in nature. It should include not only income and price level but also the quality of goods. Most of the indian products are of better quality then chineese products therefore higher weigtage should be given to India in comparision

  4. Kuldeep Patil says

    India have already crossed Japan in PPP terms.India is now 3rd in the world in terms of PPP.India is likely to cross USA in PPP terms by 2024.

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