The Third Economy~ II

According to many experts, India's real GDP and per capita income should show a higher figure if all the services in the unorganized sectors were correctly accounted for. It is doubtful if all the incomes of the vast unorganized sector — e.g., domestic services, cooks, maids, helpers, homemakers etc. are accounted for, as well as the black economy estimated to be between 20-25 percent of India's economy

- PARIMAL BRAHMA The writer is a former Dy. Comptroller & Auditor General of India and a former Ombudsman of Reserve Bank of India. He is also a writer of several books and can be reached at [e-mail]

A comparison of the two sets of figures published yesterday reveals interesting features. While the USA is ahead of China in Nominal GDP, in terms of PPP, China has already outstripped the USA by a comfortable margin to become the number one economy of the world.

India, with a GDP (PPP) of $17.65 trillion, is the clear third-largest economy. Russia is a formidable military and economic power but does not figure within the 10 largest economies in nominal terms, while in PPP terms, Russia becomes the fourth largest ahead of Germany, Japan, France, and the United Kingdom.

Another interesting aspect of this analysis is that Indonesia, as an emerging power, occupies the 7th place, outstripping the developed economies of Italy and Canada.

Does India's high GDP ranking in PPP terms make it a developed country? The answer will depend on how we define 'development'. A country may have been very developed and rich in art, culture, science, and heritage but poor in wealth.

This is what has happened to India and China, the only two continuing ancient civilizations. According to British economic historian Angus Maddison, back in 1820 (two centuries ago), India and China accounted for nearly 50 percent of global GDP—23 percent India and 27 percent China.

India and China had been the most developed countries, not only in ancient cultural heritage but also in economic terms, contributing to 50 percent of world trade until the early 1800s.