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India among five sharing half of world’s production

By Arun Kumar, IANS

Washington : 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 percent 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 percent, followed by China with 10 percent, and Japan with seven percent. Germany comes next with five percent followed by India in the fifth place with four percent.

The five countries thus account for 49 percent 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 percent using market exchange rates, but only 23 percent measured in PPP terms. Japan’s share declines from 10 to seven percent and that of Germany drops by a percentage point from six to five percent.

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 percent 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 percent 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 percent 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 percent of global output and over 27 percent 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 percent 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.