Consider the following statements:
- 1.Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries.
- 2.In terms of PPP dollars, India is the sixth largest economy in the world.
Which of the statements given above is/are correct?
Answer & explanation
Answer: (a) 1 only
PPP exchange rates are worked out by comparing what the same goods and services cost in different countries, so statement 1 is correct. In PPP terms India was the third largest economy, behind China and the USA, not the sixth, so statement 2 is wrong.
- ✓ 1. The World Bank's International Comparison Program collects prices of the same goods and services in many economies and uses them to compute PPPs, which convert a common basket of goods into 'international dollars'.
- ✗ 2. In the 2017 ICP round India's GDP in PPP terms was $8,051 billion, 6.7 per cent of the world total and third after China (16.4 per cent) and the USA (16.3 per cent). India has held third place in PPP terms since 2008, when it passed Japan.
Remember · PPP compares the price of the same basket across countries. On a PPP basis India has been the world's third largest economy since 2008.
Sources
- World Bank, World Development Indicators: Adjusting for price differences across the world ↗ “PPPs are calculated by collecting and analyzing data on the prices of the same goods and services across many economies”
- PIB (Ministry of Statistics and Programme Implementation), Purchasing Power Parities and the size of Indian Economy: Results from the 2017 International Comparison Program ↗ “In 2017, India retained and consolidated its global position, as the third largest economy, accounted for 6.7 percent ($8,051 billion out of World total of $119,547 billion) of global Gross Domestic Product (GDP) in terms of PPPs”
- World Bank Data Blog, Tracking GDP in PPP terms shows rapid rise of China and India ↗ “in 2008, India’s GDP in PPP terms surpassed that of Japan to become the third largest economy in the world.”
Question and answer: UPSC's official GS Paper I (2019, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·