Thread by @surajbrf

Thread on the growth of India's GDP Per Capita in PPP Terms.

All data from IMF WEO Oct 2024 DB:

First up, let's look at the high level picture - In 2024 India has a GDP PPP per capita of approx $11,200 . It crossed $10,000 in 2023.

1/ imf.org/en/Publication…

In terms of broad peer groups, this is in the same range as lower SE Asia, Middle East, Central Asia and South America.

10 year income growth vs SE Asian peers in the $10K-15K income group (Philipppines, Vietnam, Indonesia). India exceeds all three between 2014-2024.

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But how does it compare against the gold standard - China ? Let's pull up the original chart, but stick it next to China's chart:

Side by side, the sustained high growth China demonstrated is easily visible - several years of double digit per-capita growth, now moderating.

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Let's look a little deeper because there are some curious artifacts. First, as seen earlier, India is adding over $1K in per capita GDP (PPP) annually now. How does that compare to China ?

India today is adding purchasing power at the same rate as China in the mid 2010s.

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There's a curious aspect to the graphs in post 3 that's more clearly seen in this graph: How does average per capita GDP growth look for India and China at various income ranges ? Take a look:

The 7.5-10K and 10-15K ranges are remarkable - India is outdoing Chinese growth.

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In effect, China had sustained double digit growth in almost every range upto $7.5K, then dropped and consolidated over time.

India struggled to grow fast at lower income levels, but it outstripping China by several percentage points past $7.5K per capita GDP PPP.

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Aquick explanation is that Indian population growth fell dramatically so that explains it all. Well so lets look at population growth since 2017 in particular, when India hit $7.5K per capita GDP PPP.

In short, this is not the case.

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Indian population growth is at Chinese rate in the early to mid 2010s, and dropping.

But China dropped even faster from the mid 2010s. So at the point where India per-capita growth exceeded Chinas (~$7.5K per capita), India was growing its population faster too.

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The following chart is a good measure of the years at whicih various multiples of $1000 in GDP PPP per capita were achieved.

$1K - 2K : 13 yrs
$2K - 3K: 7 yrs
$3K - 4K - 5K: 4 yrs each
$5K - 6K - 7K - 8K: 2 yrs each
$9K - 10K - 11K - 12K : one year each.

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In effect India did quite a bit poorly vs China at income growth at lower levels but is outstripping it at average income growth beyond the >$7.5K per capita income level.

This is happening despite India registering a slower drop in population growth than China.

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There are various ways to look at this.

1. Democratic systems take longer to build consensus around faster inequitable growth vs slower equity growth at lower levels.

But rising incomes enables faster consensus and risk appetite for ifaster nequitable growth .

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2. India had too much of a social capital deficit relative to China to grow fast at lower income levels. Poor education, health, sanitation, access to food & shelter, supply of public goods, infrastructure.

All of these had to be built - many within the past 10 years.

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3. Governments are themselves getting more efficient at delivering on growth and increasing purchasing power effectively.

Let's look at average GDP PPP per capita growth over every full term government since liberalization (1991-92):

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The 2014-19 and 2019-24 govts returned the fastest growth in GDP PPP per capita ever - the latter close to double digits.

These figures include the -2.5% in 2020 due to COVID, (and 3.5% in 2008 due to the GFC). Post COVID, 2020s have seen >10% per capita PPP GDP growth.

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The dichotomy of the Incian and Chinese GDP PPP per capita growth up to and post the $7.5K level is the most interesting aspect of this analysis.

India hit $5K only in 2015. $7K in 2019. In 2025 it will be at $12K, having already crossed $11K for 2024 - 2.5x in a decade.

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There's no parallel to China's per-capita GDP growth at low income levels. They were registering ~2x Indian growth then.

But curiously, India has been outdoing China in per capita GDP PPP since ~$7.5K.

As described earlier, there are various ways to interpret this.

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Probably the most tenable explanation is China had vastly better social capital at low income levels to harness network effect of growth.

India took until the 2020s to match, and is now seeing rapid accretion of purchasing power at a rate outstripping China at this level.

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A lot of narratives point to India having per capita GDP on par with China 40 years ago. But that's a mirage.

India had very little capacity to harness capital and productivity then. It took way longer than China to get through the low income phase.

Seen here:

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India took 13 years from $1K-2K, China took 5. 7 years from $2K-3K, China again took 5. China especially accelerated in the $3-5K phase.

At $5K-7.5K, the countries were roughly at par and then India accelerates to 10K and now at a year for each $1K increment.

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In effect the disparity between the countries is the story of China's growth at lower levels. However, what's been happening for the past half a decade is that India is outstripping Chinese growth rates at its current levels.

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This is an unappreciated aspect of Indian growth that deserves greater understanding .

At the very least, wrong lessons must not be derived.

Further, what is today the fastest per capita GDP growth for a major economy at this income level ever seen, must be sustained.

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