It is true that over the last four decades or more, China has grown at a much faster pace than India. In 1980, India’s GDP stood at approximately $186 billion, while China’s was around $191 billion-the two were nearly at par. However, the current situation-based on IMF projections for October 2026-is that China’s GDP (in US dollars) is approximately $21.55 trillion, whereas India’s GDP is only $4.06 trillion. In other words, Chinese economy is roughly 5.3 times larger than India’s.
Given this, economic analysts opine that China has surged far ahead of India; for India to reach a comparable level, it will require significant effort-and attaining the scale of an economy like China’s will certainly not be easy.
Due to the depreciation of the rupee over the past one year, India’s GDP-when measured in US dollar market value-has fallen from $4.2 trillion to $4.06 trillion. Consequently, in terms of the absolute size of its GDP, India has slipped from fourth place globally back to sixth. In this context, some critics downplay India’s achievements by pointing out that while India’s GDP may rank sixth in the world, the country still ranks 153rd in terms of per capita income.
These experts argue that even though India’s GDP has grown, the country still lags significantly behind in terms of overall development-even when compared to nations it has surpassed in GDP terms. Therefore, India must substantially increase its GDP to reach a level of parity with those nations. But when we look at India’s GDP and per capita income, in terms of Purchasing Power Parity (PPP), situation, doesn’t seem to be that bleak. The World Bank and the International Monetary Fund publish GDP figures for various countries based on purchasing power parity also.
Based on PPP, India’s GDP stands at $19.19 trillion, compared to approximately $44.55 trillion for China and $32.64 trillion for the United States-meaning thereby, India’s GDP is only 2.3 times and 1.7 times smaller than those of China and the US, respectively. Furthermore, India continues to hold the third position globally in terms of GDP based on Purchasing Power Parity. This is because, in India, the purchasing power of the currency is significantly higher than its value at the market exchange rate. As of October 2026, the purchasing power of the Indian rupee was 4.72 times greater than its market exchange rate. This implies that when the purchasing power of income earned in rupees is calculated, it is substantially higher than its equivalent value in dollars based on the market exchange rate. Consequently, while India’s share of the global GDP is only 3.2 percent at market exchange rates, its share rises to 8.6 percent when measured by Purchasing Power Parity.
It is true that despite the growth in GDP (in dollar terms), India still lags far behind most other nations in terms of per capita income. When examining these figures, it becomes clear that India’s GDP, based on Purchasing Power Parity, is $19.19 trillion-a figure significantly higher than $4.06 trillion. While India ranks 153rd out of 189 countries in terms of per capita income based on market exchange rates, it ranks 124th globally when measured by Purchasing Power Parity, with a per capita income of $13,000. Looking at these figures, it becomes evident that while the USA’s GDP-based on market exchange rates-is 8.03 times larger than India’s, and the US per capita income is 34.6 times higher, the picture changes when measured by Purchasing Power Parity (PPP). In terms of PPP, the US GDP is only 1.7 times larger than India’s, and its per capita income is 7.32 times higher.
Based on market exchange rates, the US, China, Germany, the UK, and Japan all rank ahead of India. However, when measured by Purchasing Power Parity, only the US and China have a larger GDP than India. This implies that, in terms of Purchasing Power Parity, India has long since become the world’s third-largest economy.
Why is purchasing power higher in India?
Let’s try to explain this phenomenon. Real purchasing power of rupees-when converted or evaluated in dollar terms-is substantially higher than what the market exchange rate would imply.
The reason for this is that the goods and services consumed by residents in India are much more expensive in other countries. For example, a two-bedroom house that might rent for 25,000 rupees per month in Delhi (equivalent to 300 US dollars at the market exchange rate) could cost 1,500 US dollars for a similar property in a comparable city in the United States-making it five times more expensive. Similarly, a piece of clothing that costs 800-900 rupees in India (about 10 US dollars at the exchange rate) might cost 40 US dollars in the United States. Food items, too, follow a similar pattern, being significantly more expensive in the United States and many other countries. PPP data published by the World Bank is widely used.
The Impact of Inclusive Policies
In India, policy efforts have consistently focused on the upliftment of the poor, the disadvantaged, the unemployed, and marginalized sections of society. Historically, challenges arose when the aid allocated for these groups failed to reach them. In recent years, however, the effective use of technology has enabled the delivery of government assistance directly to these segments. As a result, aid has successfully reached the poor and the disadvantaged, leading to significant improvements in their well-being. According to NITI Aayog, approximately 248.2 million (24.82 crore) people in India have escaped multidimensional poverty between 2013-14 and 2022-23. The multidimensional poverty rate has declined from 29.17% in 2013-14 to 11.28% in 2022-23.
In response to a parliamentary question, the government stated that from the inception of the ‘Ayushman Bharat — Pradhan Mantri Jan Arogya Yojana’ (AB-PMJAY) until January 2026, a total of Rs 1.69 lakh crore has been sanctioned for hospitalizations under the scheme. Launched on September 23, 2018, the scheme provides health insurance coverage of up to Rs 5 lakh per year to every eligible family. Currently, it covers approximately 12 crore poor families, ASHA and Anganwadi workers, and senior citizens. For comparison, in developed nations like England, government expenditure on providing free healthcare amounts to approximately 4,000 pounds per person. Furthermore, the cost of private health insurance in such countries is also significantly higher. In other words, the expenditure per beneficiary under the Ayushman Bharat scheme is nearly 500 to 1,000 times lower than the cost of similar services in developed countries.
Similarly, with a government outlay of Rs 5 lakh crore, a large number of houses-4 crore in total-have been constructed across rural and urban areas. This translates to a government subsidy of Rs 1.26 lakh per housing unit. While the specific amount of government assistance has varied by region, the relatively low cost of construction in India has enabled the delivery of substantial social welfare at a much lower expenditure.
In the Indian context, it is often noted that expenditure on Research and Development (R&D) is quite low. In 2004-05, this expenditure stood at Rs 24,117 crore, representing hardly 0.74 percent of the GDP. Since then, it has increased to Rs 2,44,768 crore (2024-25), yet it still accounts for only 0.84 percent of the GDP. Notably, other nations that have achieved significant milestones across various sectors have invested far more in R&D compared to India. For instance, China, the United States, Germany, and Japan spend 2.5%, 3.5%, 3.1%, and 3.4% of their respective GDPs on R&D. Yet, despite relatively lower spending on R&D, India has managed to achieve significant milestones in sectors such as defense manufacturing, telecommunications, space, and digital public infrastructure (including payment systems). India’s exports of defense equipment to the rest of the world have grown rapidly. Furthermore, India has emerged as a global powerhouse in the space sector. Similarly, by developing indigenous 4G and 5G technologies, India has become largely self-reliant in telecommunications. In the realm of payment systems, India’s UPI has revolutionized the way payments are made, with nearly half of the world’s online transactions now originating from India. One reason for this is the favorable ‘Purchasing Power Parity’ (PPP) of the Indian Rupee; the cost of human resources in India is significantly lower compared to many other nations.
While it is true that India still has a long way to go regarding the well-being of the general population, infrastructure, technology, manufacturing, and rural development, it is equally true that the country has already made substantial progress in these areas. Today, India is a major power in sectors like defense, space, digitalization, telecommunications, and payments; however, by the standards of a fully developed nation, much more effort is required. Ultimately, India’s favorable position in terms of Purchasing Power Parity can play a crucial role in helping the nation evolve into a developed country on the global stage.
The author is National Co-convenor, Swadeshi Jagran Manch and Former Professor, PGDAV College, University of Delhi; Views presented are personal.