India becomes world's 6th largest economy leaving France behind - Know hidden facts in English Video Lecture | Indian Economy for Government Exams (Hindi) - Bank Exams

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hello friends and welcome to study IQ
I'm joy see joy today we will be
discussing whether India is the sixth
largest economy in real terms when
considering the gross domestic product
so recently there are many news
regarding India being the sixth largest
economy closing France so in this
lecture we will analyze how real it is
or what is a real situation let us have
a look at the news the current affair
was that India's GDP the gross domestic
product of our country is the 6th in the
world and we have crossed France earlier
we were seventh in the position and now
we have become sixth which means we have
bypassed France to become the sixth
largest economy in the world
in terms of GDP what does GDP it is
gross domestic product gross domestic
product means the monetary value of all
the goods and services produced in an
economy in a financial year we have
already discussed about GDP in detail in
some previous lectures so here we will
just brief it is a monetary value and
what is considered only the final goods
and services are considered intermediate
goods and services are not considered
and third important thing is produced
within an economy means the production
must have been taken place within the
economy and also fourthly within a time
period that is one financial year so we
have in detail discussed about GDP in
some other lectures if you have any
doubt regarding GDP please go back to
the lecture on GDP which is available on
my Facebook page coming back to our
topic
India has become the sixth largest
economy in terms of GDP so if we compare
the gross domestic product of economies
all over the world India stands in the
sixth position in this lecture we will
analyse how real it is let us see how
real it is
first of all considering the population
of India as we said India has crossed
France the GDP of India is two point six
trillion dollars
and GDP of France you will see here to
0.58 trillion dollars so there is no
much difference there is only a point
zero to difference so in terms of GDP
there is only a very minor minut
difference between the GDP of France and
also India secondly let us see
population India's population is 1.2
billion 1.2 billion and what about
France it is 67 million so 67 million
population in France and 1.2 billion in
India so in terms of population we can
say that there is a huge difference
between these two countries India has
almost 19 times the population than that
of France but when it comes to GDP there
is only a minor difference that is 0.02
trillion dollars but when it comes to
the population see the difference 1.2
billion in India and 67 million in
France this is a great variation so
considering the population we can say
that it is not a big achievement that we
have crossed France if we calculate the
per capita income per capita income as
national income divided by population if
we calculate the per capita income we
will see that the per capita income of
India is very less when we compare that
of per capita income in France because
under per capita income the population
is also considered so population is the
factor that decides the per capita
income of a country therefore we can say
there is a huge difference between the
per capita income of India and per
capita income of France so from this we
can say that the GDP figure arrived by
using dollar local currency exchange
rate this undermines the true size of
the economy so here the size of the
economy is not considered and that is
why we have become the sixth largest
economy the only consideration here is
the GDP and this must be compared with
the population that is not done here so
size of the economy or population in the
economy is not taken into consideration
therefore we can say that even though in
terms of GDP we have the sixth
largest economy in the world in reality
we are not and secondly India is a
low-cost economy and also a low-value
currency economy so these two factors
are also not considered by making this
calculation now coming to the second
important factor that is purchasing
power parity so purchasing power parity
or PPP what is purchasing power parity
it is the exchange rate system under
which exchange rates of various
currencies are determined on the basis
of their relative purchasing powers in
respective countries so in case of
exchange rate demand and supply is
considered but in case of purchasing
power parity the value of a currency is
determined according to the purchasing
power of the currency under purchasing
power parity the true value of the
currency is considered now let us see
what is purchasing power parity with an
example let us take two countries USA
and India let us consider few
commodities as well must first commodity
Pepsi this is a sample data suppose in
USA one bottle of Pepsi cost one dollar
and in India one bottle of Pepsi cost 25
rupees
take another commodity for example
McDonald Burger suppose in USA one
burger costs $4 and in India let us
assume it is 120 rupees next let us
consider a phone a Samsung phone suppose
in the US it cost thousand dollars and
in India it cost 40,000 rupees so like
this we will take few commodities or we
take a sample of commodities and a
sample of commodities have taken and
when we consider the total value let us
assume that when we add all the prices
of the sample commodities in USA it is 1
lakh dollars and when we add the price
or value of all the sample commodities
in India it amounts to 22 lakh rupees
and if we compare this to that is this
is according to the purchasing power
parity or the price of the
commodities that is here we are
considering how much of commodities a
person can buy with a particular amount
of money in India as well as in u.s.
that is a comparison the purchasing
power of a person is compared so if we
take and compare India with that of us
22 lakh rupees is required to buy the
same commodities in u.s. so here 22 lakh
rupees is required in India to buy a set
of commodities in the u.s. the same set
of commodities will cost one lakh
dollars so if we compare this we will
arrive at the definition that one dollar
equal to 22 rupees so this is the
exchange rate according to purchasing
power parity so this is with regard to
the purchasing power parity but in
reality the exchange rate would be
different and how is an exchange rate
derived under exchange rate system
supply and demand factors are considered
let us take an example we said according
to purchasing power parity in our
example one dollar equal to 22 rupees
here we are considering the exchange
rate based on supply and demand factors
let us take the forex market forex
market deals with foreign exchange or
the Forex basket so here let us take
price at the y-axis and also quantity at
the x-axis we have the demand curve that
is downward slopping we have the supply
curve that is upward slopping here this
is the price P this is the quantity Q in
the supply side what are the factors
that affect the supply exports foreign
tourists foreign investment foreign
remittances all these are the
supply-side factors because through all
this method we receive or forex foreign
exchanges supplied to our country but on
the other hand we also have the demand
curve what are the demand curve factors
importers Indian tourists going abroad
Indian investors withdrawal of FII
foreign institutional investors that is
withdrawal of shares from the Indian
equity market so all these are the
demand factors and when they compare the
demo
and and supply factors we arrived at a
equilibrium and this equilibrium will
determine the price of rupee and also
quantity so this determines the value of
rupee the doubt the demand and the
supply factors determine the value of
rupee so like this when we take the
supply and demand factors the exchange
rate would be little higher for example
in the exchange market suppose one
dollar equal to sixty six rupee and when
we compare this with that of purchasing
power parity purchasing power parity has
more value for rupee that is under the
purchasing power parity you can purchase
one dollar for 22 rupees but when it
comes to the exchange rate system what
happens you need 66 rupees in order to
purchase one dollar so that is the
difference between purchasing power
parity and exchange rate hope this is
clear for you so coming back to our
topic when we consider the purchasing
power parity India's current GDP is
around 9.45 trillion dollars but when it
comes to the exchange rate we said that
it is two point six trillion dollars so
here we will see the purchasing power
parities higher than the real exchange
rate and if we consider the purchasing
power parity India is the third largest
economy in the world
first is u.s. second is China and third
is India if we consider the purchasing
power parity but this is also
meaningless why according to purchasing
power parity we are the third largest
economy our global rank is three but why
this is meaningless because we are still
under the low middle income category
country so how can we say that a low
middle-income country is the world's
third largest economy on the basis of
purchasing power parity no this is not
possible why because here also the
population is not taken into
consideration the per capita income is
not calculated and if we have to move to
the category of middle income the
average annual income of a citizen in
exchange rate it should be dollars four
thousand five hundred and above if we
have to move to
the middle-income category and if we
want to move to high income category it
should be $12,500 on an average the
average annual income of a citizen in
exchange rate terms should be 12,500 if
we have to be a high-income country but
now what is India status it is $2,000 in
terms of exchange rate so we can say
that we have a very long way even to
reach at the middle income category now
it is $2,000 we have to attain at least
$4500
average annual income of a citizen if
you want to become a middle-income
country so it's a very long way to
middle income category then considering
the high income category it is again a
very very very long way to go for India
and if we consider the PPP that is
purchasing power parity the average
annual income of a person is seven
thousand two hundred dollars so we are
not even a middle-income category
country then how we can claim that we
are the third largest economy in the
world according to PPP that is
purchasing power parity and sixth
largest economy in the world according
to the exchange rate so in reality this
is not true because the population of
the country is not considered and what
is a reality under both the calculations
that is PPP purchasing power parity and
also exchange rate if the factor
population is taken into consideration
India's rank would be between 140 and
150 five globally you can find the PDF
of this lecture on my Facebook page and
also the previous Current Affair
lectures are available on my Facebook
page to associated lectures of this
topic oneness regarding the GDP and the
second one regarding exchange rates so
detailed
lectures of GDP and exchange rates are
also available on my Facebook page thank
you
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