understanding fastest gdp growth.pdf -

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How to read GDP growth … …and not get misled What is GDP? the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period It functions as a comprehensive scorecard of a given country’s economic health copy pasted from https://www.investopedia.com/terms/g/gdp.asp GDP Growth • often used as an indicator of the general health of the economy. • an increase in real GDP is interpreted as a sign that the economy is doing well. When real GDP is growing strongly, employment is likely to be increasing as companies hire more workers for their factories and people have more money in their pockets. • When GDP is shrinking, as it did in many countries during the recent global economic crisis, employment often declines. copy pasted from https://www.imf.org/external/pubs/ft/fandd/basics/gdp.htm Per Capita GDP • GDP per capita provides a basic measure of the value of output per person, which is an indirect indicator of per capita income • Or, how much money an average person earns • Or, how much money an average person has… to spend on needs and luxuries • Or, how prosperous is an average person GDP Growth – Latest Forecast USA 1.6% China 3.2% India 6.8% GDP Growth – Latest Forecast Rank? USA 1.6% 3 China 3.2% 2 India 6.8% 1 GDP Growth – Latest Forecast Rank? USA 1.6% 3 China 3.2% 2 India 6.8% 1 is it fair to say we are the rank 1 in growth GDP Growth – Latest Forecast Rank USA 1.6% 3 China 3.2% 2 India 6.8% 1 is it fair to say we are the rank 1 in growth yes GDP Growth – Latest Forecast Rank USA 1.6% 3 China 3.2% 2 India 6.8% 1 is it fair to say we are the rank 1 in growth yes good enough to celebrate? the devil is in details GDP-Nominal 2,500 7.2x GDP (Trillion $) GDP (Rs Lakh Crore) 2,051 2,000 USA 24.9 2,051 5.5x 1,574 China 19.1 1,574 1,500 India 3.5 286 1,000 the absolute size of the GDP is different by a very large scale. 500 1x 286 these numbers are so large that they are hard to visualize 0 USA China India let’s try to simplify by looking at per capita GDP-Nominal per capita 6,00,000 30.1x GDP (Rs Annual) GDP (Rs Monthly) 5,00,000 5,04,447 USA 60.5 lakhs 5.0 lakhs 4,00,000 China 11.0 lakhs 92 thousand India 2.0 lakhs 17 thousand 3,00,000 the population difference significantly increases the 2,00,000 5.5x difference 92,004 1,00,000 1x but then isn’t everything cheaper in our country 16,779 0 USA China India let’s adjust for purchasing power parity (ppp) GDP-Nominal per capita 9.0x 1,60,000 1,50,950 GDP (Rs Monthly) an average person in 1,40,000 USA 1.51 lakhs the US has 9 times 1,20,000 higher consumption China 43 thousand capability 1,00,000 India 17 thousand 80,000 in india, the top 10% earns more than 20 times more than the 60,000 2.6x bottom 50% 43,081 40,000 1x if you are reading this, everyone you know probably earns well over 16,779 20,000 17k. there is a magnitude of people who earn below. how many do you know personally? 0 USA China India per capita gdp used as as a proxy for per capita income Coming back to gdp growth GDP (Rs Lakh Crore) Est Growth GDP Next Year USA 2,051 1.6% 2,083 China 1,574 3.2% 1,625 India 286 6.8% 305 imf forecasts and per capita GDP adjusted for ppp GDP (Rs Monthly) Est Growth GDP Next Year USA 1.51 lakhs 1.2% 1.53 lakhs China 43 thousand 3.2% 44 thousand India 17 thousand 6.1% 18 thousand 6.8% comes down to 6.1% but that’s still #1. it’s 5.0x of USA and 1.9x of China where’s the problem? estimated population growths: usa: 0.38%, china: 0.0%; india: 0.68% observe the difference in the actual value GDP (Rs Monthly) GDP Next Year Increase by USA 1.51 lakhs 1.53 lakhs Rs 1,835 China 43 thousand 44 thousand Rs 1,379 India 17 thousand 18 thousand Rs 1,020 these are averages with the highest growth, the average indian will earn Rs 1,000 more than this year. with the and this is the base effect lowest growth, an average american will earn Rs 1800 more than this year if your income is going to go up by more than all assuming similar purchasing power Rs 1,000 next year, there are magnitudes who will not earn more or perhaps earn less assumed that average income increase will be in line with average gdp growth it’s a very unequal world out there • should we be rejoicing at our GDP growths? • celebrating the size of our economy? • or • talk about per capita income and per capita gdp? • start discussing inequality? • acknowledge our privilege? • be aware and sensitive to the structural inequities • ask for policies that bring inclusion