How BRICS countries have overtaken the G7 In GDP based on PPPs

Purchasing Power Parities (PPPs) refer to the rates of currency conversion which equalize the purchasing power of different currencies of countries by removing the differences in prices among countries. PPPs are the ratio of prices in national currencies of the same good / service in different countries. PPP concept can be understood with an example as under. If a kilogram of rice is priced ₹ 60 per kg in India, while it is priced $2.13 in the US, then the PPP for rice between India and the USA is 60/2.13 = ₹28.16 per $. Thus, for every one US $ spent on a kg of rice in the USA, ₹ 28.16 is spent on the same Kg of rice in India. Thus, PPPs are the price relatives that show the ratio of prices in national currencies of the same good or service in different countries. The final list of basket of goods has about 3,000 consumer goods and services, 30 occupations in government, 200 types of equipment goods and about 15 construction projects. Such a large list enables countries to identify goods and services which are representative of their domestic expenditures.

India’s performance par excellence in its contribution to global GDP

Analysis of data for BRICS comprising Brazil, Russia, India, China, and South Africa, as the largest developing economies, and the G7 as the largest industrialised economies of US, UK, Germany, France, Japan, Italy, and Canada, reveal interesting results. The IMF data on GDP based on Purchasing Power Parity since 1982, reveals a steady decline in the share of the G7 in global GDP, and an equal steady rise in contributions of BRICS nations.

Share of G7 nations is falling while that of BRICS is rising in global GDP

What is crucial to note is while the share of GDP of G7 nations based on PPP, reduced from 50.42% of the World’s GDP in 1982 to 30.39% in 2022, the share of GDP of BRICS nations increased from 10.66% in 1982 to 31.59% in 2022. The share of India’s GDP in World’s GDP increased from 2.98% in 1982 to 7.21% in 2022.

The analysis reveals that the share of the BRICS nations in global GDP based on PPP, equalled to that of G7 nations in 2020, the year of the pandemic. Thus, it took almost 40 years since eighties, for the BRICS to catch up with G7 and after 2020, the BRICS have surpassed the G7. Since the eighties the share of the G7 countries in the global GDP has been consistently falling every year, while the share of the BRICS countries in the global GDP has been consistently rising every year. With real GDP growing at 6.1%, IMF distinctly notes India’s performance in GDP based on PPP is par excellence.

CAGR of India’s share in global GDP impressive

The CAGR of share of BRICS GDP in world’s GDP from 1982 to 2022 is rising at 2.75% per year, that of G7 is falling at -1.26% per year, while that of India is rising at 2.22% per year. With this performance, the economic domination of the world’s GDP lies with BRICS which also houses the world’s 41% of the population, with India the world’s most populous country having the share of 17.7% of the world’s population.

India rose to 3rd position in contribution to World’s GDP

In 2022, the US topped the share of the world’s GDP based on PPP contributing to 15.47% followed by China at 18.58%, India at 7.21%, Japan at 3.78%, Germany at 3.29% and UK at 2.33%. Thus, India rose to the third position in its contribution to world’s GDP based on PPP. The contribution of agriculture sector to India’s GDP is around 18.3% in FY 23, while that of services is around 54%.
Agriculture and Services sector get the credit for India’s economic performance

The credit for India reaching the third position with respect to the world’s GDP should go to farmers of India who shaped the agriculture sector by reducing the domestic cost of production of food grains, pulses, fodder, fruits, vegetables, flowers, plantation crops, spices and condiments in the primary sector responsible for reduced (food) inflation. Another notable contribution is that of services sector, which contributed to 40% of the exports which is sustaining the foreign exchange reserve vital for sustaining India’s economic performance. These sectors richly deserve attention of the government both at central and state levels in order that they consistently contribute not only to the economic growth but also towards containing the inflation. Agriculture sector deserves a special mention as it supports around 45.5% of the workforce and 58% of India’s population.

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