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Purchasing power parity critical for per capita estimate: BIDS meet

Homo Sapiens

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Purchasing power parity critical for per capita estimate: BIDS meet​

FE REPORT | Published: March 31, 2022 08:49:06 | Updated: March 31, 2022 17:59:32

Purchasing power parity critical for per capita estimate: BIDS meet



Bangladesh should calculate its per-capita gross domestic product (GDP) in PPP or purchasing-power-parity method for a better comparison with other economies, as the current income ratings raise skepticism.

The suggestion for change in the country's economic arithmetic came from an economics professor at a meet arranged Wednesday in Dhaka by official think-tank Bangladesh Institute of Development Studies (BIDS).

Syed M Ahsan, economics professor at Concordia University in Toronto, Canada, notes that although Bangladesh has surpassed India in terms of per-capita income on the basis of current US-dollar price, but the calculation method should be PPP for getting better understanding over people power. The International Monetary Fund (IMF) in October 2021 forecast that Bangladesh's GDP per capita surpassed India's in 2020 and that this is expected to remain so over the next five years along with increasing gaps between the two.

Prof Ahsan was speaking at the seminar titled 'When am I Richer than You? A Methodological Perspective on the Constant Dollar Per-Capita Income Comparison', with BIDS Director-General Dr Binayak Sen in the chair. According to the IMF, Bangladesh's per-capita income was $1,961 in 2020 while India's was $1,929 in the same period.

However, the GDP per capita of Bangladesh based on PPP terms was $5,733 in 2021 which was 22-per cent lower than India's $7,319.

The IMF forecast that India's GDP per capita in PPP is projected to rise to $10,866 and Bangladesh's one to $8,859 by 2026.
PPP-based GDP is calculated by dividing nominal GDP by the PPP exchange rate. The latter reflects the purchasing power of the national currency relative to that of the US dollar in the USA.

Bangladesh's PPP exchange rate was Tk 33 per USD in 2021 compared to India's 22 rupees. It means that it will take Tk 33 to buy in Bangladesh what one American greenback can fetch in the United States.

The same basket costs 22 rupees in India. Thus, the purchasing power of the Indian currency is 33 per cent higher than the purchasing power of the taka.

Prof Ahsan told the meet that Japan's per-capita GDP (in current USD price) in 1986 was higher than US's. "But within some few years, the US overtook Japan and became the richest economy in the world."

"So, the GDP-calculation method in current USD price or in constant price might represent the actual scenario of a country's economy. However, the per-capita income on the basis of PPP could give a better understanding about the power of the people of a country," he says. Dr Binayak Sen said although Bangladesh's per-capita income in the 1970s and 80s was higher than India's, the country lost its economic rhythm later. It regained its position again in 2020.

"But if we calculate the per-capita GDP in PPP method, it could give us a better understanding about the comparisons." He emphasises utilisation of the same PPP method across South Asian nations to get better and quality data.

Many economists are of the view that the traditional measuring of per-capital income conceals the real income status of bottom-line section of people and hence the income disparity in a society cannot be gauged. Gini coefficient is the calculus that is applied for measuring inequality.
kabirhumayan10@gmail.com


 

Paitoo

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I have no opinion on it , just something I heard people say
don't know that's why the question mark

first I need to know how its calculated compared to nominal GDP

I am no economist, but I believe PPP is calculated by comparing the price of a basket of goods in your country (let's say India), compared to price of the same basket in another country (say US). This is then compared with the official exchange rate and the GDP adjusted accordingly.

So if basket in India = INR 200
same basket in US = $4
Then PPP ratio = 200/4 = 50
If official exchange rate = INR 75/USD, then conversion factor = 75/50 = 1.5
Therefore if nominal indian GDP (per capita) = USD 2000, then adjusted = 2000*1.5 = USD 3000

Others can correct me if I am wrong
 

Bilal9

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No worries, all a song and dance by Mr. Binayak Sen to offer cooling salve to hurt Sanghi feelings.

We all know why Mr. Binayak Sen was appointed to head BIDS.

Any way you look at it, Bangladesh did not do anything spectacular.

It just kept on course, while Modi and Nirmala effed up Indian economy.

No matter, in a half a decade GDP per capita of Bangladesh based on PPP terms will exceed that of India too, if Modi Magic continues..

Not a Betting man (which is haram), but here's $100 with my name on it, mark my words.

iu
 

Black_cats

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No worries, all a song and dance by Mr. Binayak Sen to offer cooling salve to hurt Sanghi feelings.

We all know why Mr. Binayak Sen was appointed to head BIDS.

Any way you look at it, Bangladesh did not do anything spectacular.

It just kept on course, while Modi and Nirmala effed up Indian economy.

No matter, in a half a decade GDP per capita of Bangladesh based on PPP terms will exceed that of India too, if Modi Magic continues..

Not a Betting man (which is haram), but here's $100 with my name on it, mark my words.

iu

Don't you think base year revision will have an affect on PPP as well?
 

Indos

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isnt PPP usually considered BS though?

PPP is basically the real purchasing power, with money in your pocket and bank, how much you can buy goods, foods, service, rent, ect within your own country.

Here not far from my place I can have restaurant that can give me less than 1 USD for my lunch, including a portion of chicken, vegetable, chilly, and a free glass of water

1648796409111.png



Can you have that in USA with only 1 USD ?

That is restaurant, not food stall in the street
 

Bilal9

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PPP is basically the real purchasing power, with money in your pocket and bank, how much you can buy goods, foods, service, rent, ect within your own country.

Here not far from my place I can have restaurant that can give me less than 1 USD for my lunch, including a portion of chicken, vegetable, chilly, and a free glass of water

View attachment 829278


Can you have that in USA with only 1 USD ?

That is restaurant, not food stall in the street

Nope. Not in California.

McDonalds Hamburger alone costs minimum $10.

Gallon of gas (4 liters) close to $7.

Inflation I guess.

On an aside, the meal looks delicious. :-)

However - in the Indian context, Modi (and his Bangladeshi supporters) want to defend Modi claim that Indian economy is not yet worse than that of Bangladesh. That is the focus of the article.

In India, people will put up with meal and other lifestyle standards far worse than Bangladesh.

We have widespread jokes in Bangladesh on certain ethnic groups being spendthrift in India. Indians know it well.

This is partly due to low level of salaries for lower middle and even some middle class people compared to other countries.

There are people in India who will complete lunch with half a roti and a raw onion. This is their meal - which costs a fifth of a dollar at most.

Even the poorest person in Bangladesh will eat better than this.

In YT you will see insane Indian videos like this, "Top cheapest item to be found in Indian Market". No other country has this type of fan who are spendthrifts as much as in some regions of India.

The economy caters to that type of person by sacrificing the type and quality of products produced and sold.

In most cases (with exceptions) Indian products sold in Bangladesh are much worse in quality than products sold which are made in other countries (China for example). This is because (maybe) Indians produce items only to a price point that are sold in their own market, as well that sold in Bangladesh.

But this type of economic activity (making products cheaper, and cheaper - and cheaper) plays into the PPP game.
 
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Indos

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Nope. Not in California.

McDonalds Hamburger alone costs minimum $10.

Gallon of gas (4 liters) close to $7.

Inflation I guess.

On an aside, the meal looks delicious. :-)

However - in the Indian context, Modi (and his Bangladeshi supporters) want to defend Modi claim that Indian economy is not yet worse than that of Bangladesh. That is the focus of the article.

In India, people will put up with meal and other lifestyle standards far worse than Bangladesh.

We have widespread jokes in Bangladesh on certain ethnic groups being spendthrift in India. Indians know it well.

There are people in India who will complete lunch with half a roti and a raw onion. This is their meal.

The economy caters to that type of person by sacrificing the type and quality of products produced and sold.

Even the poorest person in Bangladesh will eat better than this.

In most cases (with exceptions) Indian products sold in Bangladesh are much worse in quality than products sold which are made in other countries (China for example). This is because (maybe) Indians produce items only to a price point that are sold in their own market, as well that sold in Bangladesh.

But this type of economic activity plays into the PPP game.

Yup, that is Padang Food (West Sumatran food) which basically dominate restaurant accross Indonesia, even you can find it in East Timor as well.

There are expensive Padang Food, but in majority they are affordable. For construction worker even they prefer cheaper one, which we call it as Warteg, that are even cheaper and we can have tofu and tempe. Warteg is run by Javanese people from Tegal ( Warung Tegal/Warteg), we also can find Warteg accross Java island

1648797916978.png


This is Warteg that even can be cheaper

1648797815693.png



------------------------------------

Any way how much Indomie sold in USA ?

Indomie is produced in Indonesia and with 1 USD we can have 6 packs, I feel full with only 2 packs

1648798015045.png



------------------------------------------

About India economy, I dont get that many rating institution still project India economy at 7-9 percent for 2022. Well I predict India economy will grow about 4.5-5.5 percent in 2022 (Jan-December), we will see soon whether me who is right or those people who worked in Moody/ Fitch rating, havent seen Moody analyst name yet, but Fitch rating is full of Indian ethnic analysts and economist.....
 

Bilal9

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Yup, that is Padang Food (West Sumatran food) which basically dominate restaurant accross Indonesia, even you can find it in East Timor as well.

There are expensive Padang Food, but in majority they are affordable. For construction worker even they prefer cheaper one, which we call it as Warteg, that are even cheaper and we can have tofu and tempe. Warteg is run by Javanese people from Tegal ( Warung Tegal/Warteg), we also can find Warteg accross Java island

View attachment 829281

This is Warteg that even can be cheaper

View attachment 829280


------------------------------------

Any way how much Indomie sold in USA ?

Indomie is produced in Indonesia and with 1 USD we can have 6 packs, I feel full with only 2 packs

View attachment 829284


------------------------------------------

About India economy, I dont get that many rating institution still project India economy at 7-9 percent for 2022. Well I predict India economy will grow about 4.5-5.5 percent in 2022 (Jan-December), we will see soon whether me who is right or those people who worked in Moody/ Fitch rating, havent seen Moody analyst name yet, but Fitch rating is full of Indian ethnic analysts and economist.....

Padang and Warteg food looks delicious! I am a fan of Indo food as you can tell!

I had Nasi Padang before but will look for Warteg next time I visit local Indonesian outlets locally, Lot of Vietnamese and Thai food also has Fried Tofu mixed in with Hoisin Sauce etc.

You are right Indian analysts economists are all over the global thinktanks that predict India's economic future and they cannot really antagonize Modi Govt., they have powerful jobs waiting for them when they return to India after their Western tenures.

Cheapest Indomie "Mi Goreng" variety is sold in Amazon US for $11 (10 pack) so this is six times Indonesia price. However free shipping is included. I have heard that 5 packets sell for $2 in local Asian supermarkets, which is more reasonable (but still twice Indonesian price).

 
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Indos

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Padang and Warteg food looks delicious! I am a fan of Indo food as you can tell!

I had Nasi Padang before but will look for Warteg next time I visit local Indonesian outlets locally, Lot of Vietnamese and Thai food also has Fried Tofu mixed in with Hoisin Sauce etc.

You are right Indian analysts economists are all over the global thinktanks that predict India's economic future and they cannot really antagonize Modi Govt., they have powerful jobs waiting for them when they return to India after their Western tenures.

Cheapest Indomie "Mi Goreng" variety is sold in Amazon US for $11 (10 pack) so this is six times Indonesia price. However free shipping is included. I have heard that 5 packets sell for $2 in local Asian supermarkets, which is more reasonable (but still twice Indonesian price).


The cheapest ones are actually Warkop (Warung Kopi/Coffee Shop). Basically in Indonesia this will be in the form of food stall. They sell Indomie with eggs, half cooked eegs, Coffee, Milk Coffee, baked bread with chocolate, etc (Indonesian fast food)


1648802203656.png


And also bubur kacang ijo (Indonesian name)

1648802137546.png


There is one found in New York, I bet many customers are just American Indonesians and Indonesian citizens who work in New York.

 
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