Although INDIA overtook Japan...

Despite the slowdown in the past few years, the Indian-Economy overtook the Japanese economy, in both, GDP terms and GDP in terms of Purchasing-Power-parity (PPP) in 2011. While calculating total economic output and real differences in income, it is important to include relative costs and inflation in different countries than just include exchange rates. Although, the difference was not very large, INDIA’s GDP in PPP terms was 4.46 trillion and the Japanese figure was 4.44 trillion. According to the method, a dollar should buy same amount of goods and services in different countries, and, it tries to reduce alterations due to financial and political factors that increase volatility, but changes in income are slow and adversely affect the living-standard in poor countries. There are two ways to calculate PPP; one, the Real-Effective-Exchange-Rate (REER) and the other is the Big Mac Index. Under REER the exchange rate is adjusted for inflation and the Big Mac Index considers the difference in price of its burgers in different countries. The REER for the Indian-Currency against the US dollar is around Rs 58-60 which says that the Indian currency is rightly valued, but the latter says it is undervalued by 62%. PPP helps us adjust income and inflation in different countries for a meaningful assessment of standard of living in different countries.  In International Comparison program in 2011 in which the World Bank evaluate PPP in different economies for assessing real living costs. The results in the recent study are quite different from its previous review. China supersedes INDIA, but is at number two after the US. The difference between the US and China is not that huge as the difference between INDIA and China. However, per capita GDP in PPP terms in Japan is far higher than INDIA.

The per capita GDP in PPP terms is calculated by dividing the total value of goods and services produced within an economy in a year with the average population in the same year. Japan’s pre capita GDP in PPP terms is 36, 618 $ is far greater than that of INDIA at 3, 870 $  Per capita GDP in PPP terms which is a more exact measure of increase in welfare and standard of living, INDIA has still to catch a lot to overtake the Japanese figures.  Nevertheless, the difference in the Japanese and Indian per capita GDP in PPP terms is less than the difference in nominal per capita GDP in dollar terms.  Most economists use per capita GDP in PPP terms to compare and contrast the difference in the standard of living. However, we should not forget that there is a large difference in population of INDIA and Japan which requires that given the large difference in the per capita GDP the Indian economy, with its so large population base, should grow much more to outpace Japan in per capita GDP in PPP terms. The high growth rate after the stimuli provided in 2008 recession made it possible for INDIA to outdo Japan and if INDIA is to achieve a higher per capita GDP in PPP terms it will have to grow at its fastest for a decades to match Japanese per capita GDP in PPP terms. Expenditure on health services is also an important indicator of welfare within an economy because it adds to the quality of human-capital and, here too, INDIA is far behind Japan. INDIA spends only $ 86 as per capita public and private health expenditure in PPP terms while Japan’s expenditure is around $ 2, 500, much higher than INDIA.    

Moreover, others indicators also show that the Indian Economy is still a long way to go to catch-up Japan’s consumption levels in terms of oil and electricity, health indicators like infant mortality rate, and unemployment levels all of which has a considerable effect on the quality of life and standard of living. Japan uses 1.5849 gallons of oil per day per capita while INDIA consumes only 0.0956 gallons. The per capita consumption of electricity in Japan is 7, 299 kWh while INDIA consumes only 484 k Wh, much below Japan. The life expectancy at birth in Japan is 82.17 while in India it is 66.46. The number of deaths of infants under one year old in a given year per 1,000 live births in Japan is 2.79 while in India it is 49.13. The annual number of births per 1,000 people in Japan is 7.41 while in India it is 21.34. Japan has an unemployment rate of 5.60% while India has 10.70%. The number of adults living with HIV/AIDS in Japan is 0.10% while in India it is 0.30%. The degree of inequality is also higher in INDIA as compared to Japan…