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India among five sharing half of world's production

business Updated: Dec 18, 2007 11:31 IST
Arun Kumar
Highlight Story

Five countries - the US, China, Japan Germany and India - account for nearly half of the world's GDP as measured by buying power in US dollars, according to a new World Bank report.

The new data released Monday shows the world economy produced goods and services worth almost $55 trillion in 2005 and that almost 40 per cent of the world's output came from developing economies.

In the new tabulations of GDP, the US remains the largest economy in the world with a world share of 23 per cent, followed by China with 10 per cent, and Japan with seven percent. Germany comes next with five percent followed by India in the fifth place with four per cent.

The five countries thus account for 49 per cent in the new preliminary International Comparison Programme report on purchasing power parity (PPP).

"The real outputs of their economies have not changed, only the way we measure them has," it says.

When measured using PPPs, world GDP is larger than GDP converted to US dollars using market exchange rates. This is because exchange rates tend to understate the purchasing power of the currencies of less developed economies.

"This effect is particularly noticeable for low and lower-middle-income economies. For example, India's share of global GDP in 2005 is slightly greater than four percent when measured using PPP-based GDP, but only two percent when measured using market exchange rates," says the report.

Similarly China's share goes up from five to 10 percent. In contrast, the US' share of world GDP is 29 per cent using market exchange rates, but only 23 per cent measured in PPP terms. Japan's share declines from 10 to seven per cent and that of Germany drops by a percentage point from six to five per cent.

Although the report suggests that the two Asian giants' economies are smaller than previously estimated, China still ranks as the world's second largest economy with over nine percent of world production and India follows as the fifth largest with over four percent of the world total.

China was previously estimated to have 14 per cent of global GDP, while India's share was put at six percent. In the Asia-Pacific region, China and India still take the largest share, with almost two-thirds of regional GDP.

These results are more statistically reliable estimates of the size and price levels of both economies, the report said. It suggested that previous less reliable methods led to estimates of GDPs that were 40 per cent larger than the results of the new, improved methods and benchmark.

China participated in the survey programme for the first time ever and India for the first time since 1985.

Of the twelve largest economies, which together account for two-thirds of global GDP, five are low or middle-income countries - China, India, Russia, Brazil and Mexico - which collectively account for almost 22 per cent of global GDP. The high-income economies are listed as the US, Japan, Germany, Britain, France, Italy and, Spain.

The five largest developing economies account for more than 20 per cent of global output and over 27 per cent of the world expenditures for investment purposes, according to the report based on price data on goods and services in 146 countries, adjusted to reflect local cost and affordability, and converted to dollars.

The key findings of the study were:

* Overall, the results benchmarked to 2005 Purchasing Power Parities (PPP) show that the size of the world economy is smaller than previous estimates.

* Compared with previous estimates, the relative size of developing economies has decreased by seven percentage points or one sixth. The global GDP shares of the largest developing countries are also smaller.

* The Asian and African economies are one-third and one-fourth smaller, respectively. However, Asia still accounts for over 20 per cent of the world 's output.

* Brazil accounts for half of the South American economy, and nearly two-thirds of collective government expenditures in the region.

* Russia dominates the CIS regional economy with three-fourths of the total and two-thirds of the investment shares.

* The African economy is dominated by South Africa, Egypt, Nigeria, Morocco, and Sudan, which collectively account for nearly two-thirds of the region's GDP.