Putting IMF's PPP GDP to the test

[Martian2]

United Nations says China is world's largest manufacturer by far

Earlier, I had covered the quality of Chinese exports by showing that China is the world's largest exporter of high-tech goods.

Now, I want to cover the topic of quantity. The United Nations has collected data, which shows China was responsible for 23.2% of world manufacturing. The United States was in second place with 17.2% of world manufacturing.

The IMF PPP rankings show China as the world's largest economy and the United States as the second-largest. I don't have a problem with that, because the United Nations manufacturing data is consistent with the IMF PPP claims.

However, I strongly do not believe the IMF PPP claim regarding India. The IMF PPP rankings claim that India is the world's third-largest economy and 40% of China's economy!

This is an unbelievable claim by the IMF. The United Nations data show India was in 11th place with a miniscule percentage of world manufacturing at 2%. China's manufacturing sector is 11 times bigger than India's.

Qualitatively, China exports high-value high-tech products that India does not. When you combine the quantitative and qualitative Chinese advantages, there is no way you can claim the Indian PPP GDP is 40% of China's. That is a complete lie and an incorrect analysis by the IMF.

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China Solidifies Its Position as the World’s Largest Manufacturer | MAPI

 

[AUz]

@Martian2 Why don't you email IMF with your queries rather than opening a thread here?

Or how about post your conclusions on an economic forum and see the results?

I, for one, have studied International economics in top U.S schools. Your basic assumption that only four things really matter in GDP calculations is wrong. Moreover, you have completely skipped the financial side of macroeconomics which forms the very basis of Purchasing Power methodology.

Please do us all a favor and email your findings to IMF and see what happens. This forum isn't for discussing these matters since none of us have enough information to come to any conclusion. If you had actual deep knowledge of international economics, you would have known that to begin with.

 

[Martian2]

@Martian2 Why don't you email IMF with your queries rather than opening a thread here?

Or how about post your conclusions on an economic forum and see the results?

I, for one, have studied International economics in top U.S schools. Your basic assumption that only four things really matter in GDP calculations is wrong. Moreover, you have completely skipped the financial side of macroeconomics which forms the very basis of Purchasing Power methodology.

Please do us all a favor and email your findings to IMF and see what happens. This forum isn't for discussing these matters since none of us have enough information to come to any conclusion. If you had actual deep knowledge of international economics, you would have known that to begin with.

The IMF is controlled by the United States. They are not impartial.

I am attempting to open people's eyes. If you don't like it, go read some other thread.

Also, my chart covers 7 of the most important economic factors. They are all macro-economic and affect the overall economic productivity of a country. If you think I'm wrong, feel free to open your own thread and discuss your reasoning.

I've explained my reasoning and people are free to agree or disagree with me.

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For the benefit of everyone, I will summarize my reasoning.

If the technology is the same for two countries, the amount of energy consumed will determine the relative size of two economies.

Since China uses about five times more energy than India (see BP citation), we expect China's economy to be five times larger than India's IF both countries had the same technology.

However, I have used citations (from the Nature Index and China's high-tech exports from the World Bank) to prove that China's technology and science are far superior to India's.

Thus, it is common sense that China's economy is more than five times larger than India's.

However, the IMF PPP ranking is claiming that the Indian economy is 40% the size of China's. That is impossible. The Indian economy must be less than 20% of China's (if the technology and science were equivalent in both countries).

Since we know that Chinese science, technology, and productivity (due to the massive use of industrial robots and machine tools by China -- see IFR Statistical Department citation and Gardner 2015 World Machine Tools Consumption), this means the Chinese economy is closer to 10 times larger than India's.

An accurate assessment of the Indian economy should be about 10% of China's. Not 40%. The IMF PPP assessment is dead wrong.

The annual purchase of cars (which is the most expensive consumer product aside from houses) is a good indication of the relative size of economies. China's light-vehicle market is 8 times larger than India's. This puts the maximum size of the Indian economy at no more than 12% of the Chinese economy.

The United Nations 2013 report on the size of manufacturing in different countries bolsters my claim that India is about 10% of China's economy. The Chinese economy was 23.2% of world manufacturing. The Indian economy was 2% of world manufacturing. This puts the Indian economy at 1/11 or 9% of China's economy.

When you look at all of the critical indicators, they all point in one direction. The Indian economy is 9%-12% of the Chinese economy. It is not the ridiculous 40% that the IMF PPP is claiming.

 

[Kolaps]

LOL

IMF's PPP GDP is a political number.

The truth, China's PPP GDP today is already around USD 24,000 billion.

Surpassed USA's GDP around 2010.

 

[liall]

Martian Logic: Singapore #4 in hi-tech product exports. So Singapore should be #4 GDP PPP. That is some quality research.

 

[Martian2]

Martian Logic: Singapore #4 in hi-tech product exports. So Singapore should be #4 GDP PPP. That is some quality research.

Singapore has a tiny population and consumes very little energy.
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Here is the logical process.

Step #1: Compare countries based on the amount of energy consumed. The higher the total energy consumed, the higher the presumed real GDP.

China consumes 29% more total energy than the United States. China is presumed to have a real GDP that is 29% higher than the US.

China consumes five times more total energy than India. China is presumed to have a real GDP that is five times larger than India.

Step #2: A country with higher science and technology will produce more value per given unit input of energy. This means a country with higher science and technology must have its real GDP adjusted upwards in comparison to a country with lower science and technology.

Chinese and US science and technology are about on the same level. Both build supercomputers, billion-dollar offshore oil platforms, 10,000-pound communications satellites, stealth fighters, nuclear reactors, massive construction equipment (e.g. SANY and Caterpillar), semiconductors, etc.

The US is number one on the Nature Index. China is number two. They are pretty close.

For verification, the World Bank data shows China is the world's largest exporter of high-tech products.

Thus, there is no adjustment in real GDP for China vis-a-vis the United States. China is still presumed to have a real GDP 29% larger than the US.
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However, India is ranked really low on the Nature Index. China's output is about 700% (or a multiple of 7) higher than India. This indicates a significant Chinese science and technology advantage.

Furthermore, the World Bank reports that China's high-tech exports is 33 times higher than India.

Thus, we have to decrease India's real GDP relative to China by about 50% to account for the low level of Indian science and technology.

Step #3: The final factor is productivity. If one country is using industrial robots then it can produce a lot more goods than a country that is producing it by hand. Also, a country that is using machine tools will be able to produce superior-quality goods at a machine-level pace versus a low-tech hand-crafted country.

This is the mechanization factor. A country that is more mechanized will logically produce more and better goods. A robot works 24 hours per day and it doesn't get tired or make mistakes when functioning properly.

China has 18 times more installed industrial robots than India. Also, China installs 19 times more machine tools than India annually. This means a significant mechanization productivity advantage for China.

Thus, we have to decrease India's real GDP relative to China by another 50% to account for the low level of Indian mechanization of industrial robots and machine tools.
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Let's put it all together.

Based on energy consumption alone (see BP citation), China's GDP is five times larger than India's.

Based on China's significantly higher science and technology (see Nature Index and World Bank high-tech export data), we adjust India's real GDP downwards by 50%. This makes sense, because Chinese goods are much higher-tech and valuable than Indian exports (e.g. mangos).

Based on China's significantly higher mechanization of industrial robots and machine tools, Chinese economic productivity far outstrips India's primitive manufacturing. To account for the discrepancy in the quantity and quality of output, we adjust India's real GDP downwards by another 50%.

China's PPP GDP is $18 trillion.

Based on the difference in energy consumption, India's GDP has to be divided by five. This means the Indian GDP (IF science, technology, and productivity were equal) would be $3.6 trillion.

Due to India's low science and technology and ridiculously small high-tech exports, the Indian GDP is adjusted downwards by 50% for lack of sophisticated manufactured goods and exports. This brings the Indian GDP to $1.8 trillion.

Due to India's lack of mechanization, Indian productivity is terrible due to the lack of industrial robots and machine tools. After adjusting Indian real GDP downwards by another 50% for lousy productivity, the Indian GDP is $0.9 trillion.

In conclusion, the real Indian GDP is about 5% of China's or $0.9 trillion.

The discrepancy is not as large in the service sector. We'll just double India's real GDP and call it a day. The real Indian GDP is about $2 trillion (or 1/9 China's). This is corroborated by the difference in the size of the Chinese and Indian car markets. All of the data fits, except for the IMF's ridiculous claim of a massive Indian PPP GDP of $7.4 trillion.

 

[liall]

Singapore has a tiny population and consumes very little energy.
----------

Here is the logical process.

Step #1: Compare countries based on the amount of energy consumed. The higher the total energy consumed, the higher the presumed real GDP.

China consumes 29% more total energy than the United States. China is presumed to have a real GDP that is 29% higher than the US.

China consumes five times more total energy than India. China is presumed to have a real GDP that is five times larger than India.

Step #2: A country with higher science and technology will produce more value per given unit input of energy. This means a country with higher science and technology must have its real GDP adjusted upwards in comparison to a country with lower science and technology.

Chinese and US science and technology are about on the same level. Both build supercomputers, billion-dollar offshore oil platforms, 10,000-pound communications satellites, stealth fighters, nuclear reactors, massive construction equipment (e.g. SANY and Caterpillar), semiconductors, etc.

The US is number one on the Nature Index. China is number two. They are pretty close.

For verification, the World Bank data shows China is the world's largest exporter of high-tech products.

Thus, there is no adjustment in real GDP for China vis-a-vis the United States. China is still presumed to have a real GDP 29% larger than the US.
-----

However, India is ranked really low on the Nature Index. China's output is about 700% (or a multiple of 7) higher than India. This indicates a significant Chinese science and technology advantage.

Furthermore, the World Bank reports that China's high-tech exports is 33 times higher than India.

Thus, we have to decrease India's real GDP relative to China by about 50% to account for the low level of Indian science and technology.

Step #3: The final factor is productivity. If one country is using industrial robots then it can produce a lot more goods than a country that is producing it by hand. Also, a country that is using machine tools will be able to produce superior-quality goods at a machine-level pace versus a low-tech hand-crafted country.

This is the mechanization factor. A country that is more mechanized will logically produce more and better goods. A robot works 24 hours per day and it doesn't get tired or make mistakes when functioning properly.

China has 18 times more installed industrial robots than India. Also, China installs 19 times more machine tools than India annually. This means a significant mechanization productivity advantage for China.

Thus, we have to decrease India's real GDP relative to China by another 50% to account for the low level of Indian mechanization of industrial robots and machine tools.
----------

Let's put it all together.

Based on energy consumption alone (see BP citation), China's GDP is five times larger than India's.

Based on China's significantly higher science and technology (see Nature Index and World Bank high-tech export data), we adjust India's real GDP downwards by 50%. This makes sense, because Chinese goods are much higher-tech and valuable than Indian exports (e.g. mangos).

Based on China's significantly higher mechanization of industrial robots and machine tools, Chinese economic productivity far outstrips India's primitive manufacturing. To account for the discrepancy in the quantity and quality of output, we adjust India's real GDP downwards by another 50%.

China's PPP GDP is $18 trillion.

Based on the difference in energy consumption, India's GDP has to be divided by five. This means the Indian GDP (IF science, technology, and productivity were equal) would be $3.6 trillion.

Due to India's low science and technology and ridiculously small high-tech exports, the Indian GDP is adjusted downwards by 50% for lack of sophisticated manufactured goods and exports. This brings the Indian GDP to $1.8 trillion.

Due to India's lack of mechanization, Indian productivity is terrible due to the lack of industrial robots and machine tools. After adjusting Indian real GDP downwards by another 50% for lousy productivity, the Indian GDP is $0.9 trillion.

In conclusion, the real Indian GDP is about 5% of China's or $0.9 trillion.

The discrepancy is not as large in the service sector. We'll just double India's real GDP and call it a day. The real Indian GDP is about $2 trillion (or 1/9 China's). This is corroborated by the difference in the size of the Chinese and Indian car markets. All of the data fits, except for the IMF's ridiculous claim of a massive Indian PPP GDP of $7.4 trillion.

You can not just discount an economy by a factor of 2 or 50% just like that on one factor like number of industrial robots.

India is not able to replicate the numbers in exports like China did as its economy increased. What you are saying is since India is not able to do exports as much as it should have when compared to China its economy is inflated. In fact the truth is India's economy and China's economy are not perfectly co related when it comes to many macro economic factors.

I am pretty sure IMF employs economists who are experts in their fields and wouldnt dis credit their work just like that.

 

[Martian2]

You can not just discount an economy by a factor of 2 or 50% just like that on one factor like number of industrial robots.

India is not able to replicate the numbers in exports like China did as its economy increased. What you are saying is since India is not able to do exports as much as it should have when compared to China its economy is inflated. In fact the truth is India's economy and China's economy are not perfectly co related when it comes to many macro economic factors.

I am pretty sure IMF employs economists who are experts in their fields and wouldnt dis credit their work just like that.

Look. This is not that hard.

Based on energy input alone, India's real GDP cannot exceed 20% of China's GDP.

I don't care what discount that you want to use for India's lower science and technology.

I also don't care what discount that you want to use for India's lower productivity.

The number must be lower than 20% of Chinese GDP. Whether you want to say 15% or 10% (which is where I think it is), the fact remains that you must impose a penalty for lower-value Indian goods and much lower productivity.

At 20% of China's GDP (because India uses 20% of China's total energy per year), India is capped at $3.6 trillion (IF you believe Indian science/technology and productivity are equal to China's).

I don't know what the IMF is smoking, but there is no way to claim an Indian GDP of $7.4 trillion. The IMF is lying. The IMF is claiming real Indian GDP is 40% of China's. That would require superior Indian technology and superior Indian productivity. The opposite is true.

Take your pick. Either the IMF is lying OR the World Bank, International Federation of Robotics, Gardner Machine Tools Consumption Survey, EuroMonitor International, Nature Index, and the United Nations report on manufacturing are lying. One of the two groups is lying, because their data don't match. I say the IMF is clearly lying.

 

[liall]

Look. This is not that hard.

Based on energy input alone, India's real GDP cannot exceed 20% of China's GDP.

I don't care what discount that you want to use for India's lower science and technology.

I also don't care what discount that you want to use for India's lower productivity.

The number must be lower than 20% of Chinese GDP. Whether you want to say 15% or 10% (which is where I think it is), the fact remains that you must impose a penalty for lower-value Indian goods and much lower productivity.

At 20% of China's GDP (because India uses 20% of China's total energy per year), India is capped at $3.6 trillion (IF you believe Indian science/technology and productivity are equal to China's).

I don't know what the IMF is smoking, but there is no way to claim an Indian GDP of $7.4 trillion. The IMF is lying. The IMF is claiming real Indian GDP is 40% of China's. That would require superior Indian technology and superior Indian productivity. The opposite is true.

Take your pick. Either the IMF is lying OR the World Bank, International Federation of Robotics, Gardner Machine Tools Consumption Survey, EuroMonitor International, Nature Index, and the United Nations report on manufacturing are lying. One of the two groups is lying, because their data don't match. I say the IMF is clearly lying.

India is not completely electrified which China just recently achieved. Congratulations on that but that means you are equating the productivity of the off-grid Indians which is a significant number to zero on the basis of energy consumption in the form of electricity.