Page 115 - Abhivruddhi

In 2007, eleven countries were already in this club. The highest GDP
was that of USA $14.47 trillion, followed in descending order by Japan
at $4.57 trillion, then China ($3.55 trillion.). The others were Germany,
France, Italy, Spain, Canada, Brazil and Russia in that order. Just above
India ($1.24 trillion) was Russia ($1.40 trillion)
It can be argued that membership of a privileged economic club should
be based on (average) citizens’ wealth and thus per capita GDP. Gaining
membership to a club based mainly on population does not mean much.
GDP rankings is, mostly, merely a numbers game. Nevertheless, for some
purposes, there is justification for rankings. A high GDP level entails
high importance of a country in various dimensions. A bigger market
attracts more investment from firms; a higher tax base and so higher
taxes permit larger defense expenditures with geo strategic implications.
Although India’s clout in the global economy is based on its population
and thus size of GDP, the clout still does count.
Allowing for the limited importance of the level of GDP as discussed
above, nevertheless the jubilation after India’s GDP crossed one trillion
was excessive. This is because a special factor led to the sudden jump in
GDP. Although it was a booming period with robust 9% real GDP growth
in 2007 and preceding fiscal year 2006-2007, this GDP jump was due to
a sharp exchange rate rise, from about Rs. 44/$ to Rs. 40/$ in April 2007.
This jump can be seen in Table I below. In $ terms, NGDP rose by over
30% roughly double of that in rupee terms. The next year 2008 NGDP in
$ fell by 1.1% although in Rs. it grew by a healthy 12.6%, because the sharp
Rupee rise had corrected. In short, the euphoria in 2007 was overdone.
Assessing how robust is a rise in $NGDP has to be done cautiously, since
it may have been due to big exchange rate changes.
The next big benchmark of $2 trillion was reached in 2014, seven years
later (Table One below). Then in mid June 2019, at the fifth meeting of
the Governing Council of Niti Aayog, PM Modi declared his goal was to
make India a $5 trillion economy. He added this is achievable, but with
the concerted efforts of states.
This goal seems to have been fairly well grounded in, and based upon,
data published in the World Economic Outlook (WEO) of the IMF as of
April 2019. Table One below provides the actual (for 2018) and projected
IMF data (upto 2024) for $ NGDP on the basis of which the Prime
Minister must have made his statement.

This entire episode about the rupee fiasco in April 2007 has been

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