While measured in terms of current dollar purchasing power, Japan is the second largest economy in the world, as of the year 2012. However, a recent survey by the World Bank, as of May 2014, India surpasses Japan as the third largest economy, right after U.S and China. Thus, on a PPP (purchasing power parity) basis, India holds a 6.4 percent of the global GDP. Trailing behind is Japan, which holds a 4.8 percent of the global wealth. This is a stark contrast to the World Bank’s report in 2011, which held India in the 10th place .
The above figure shows the ranking of the companies of various economies, both in terms of PPP as well as the exchange rate. As we can observe, in terms of exchange rates, Japan ranks at a higher rate of roughly 8, while India ranks down at roughly 3.5. This is because the prices in India are still well below those of more advanced economies. PPP is evaluated by studying the poverty threshold in various economies. Since a dollar can buy more in some countries and less in others, PPP-based comparative study can be very well used for comparison analyses.
The pie chart above represents the twelve largest countries by share of the PPP-based world GDP. This gives a relatively new perspective of the global economy as compared to the last survey in 2005. By the ranking of GDP per capita, the largest economies need not always be the richest. Large economies generally have large populations, thus setting the stage for continual economic growth .
According to Indian Foreign Trade statistics released in April 2014, exports from India were valued at US $ 25634.08 million (that comes upto Rs.154718.60 crore). This is a significant 5.26% positive growth than the dollar level in April 2013. However, imports from India were valued at US $ 35720.03 million (Rs.215593.93 crore) in April 2014, which represents a whopping 15% negative drop in dollar terms as compared to April 2013.
Considering Japan, the following table reveals statistics of Japan’s foreign trades with the U.S. during the years 2014 and 2013, respectively .
India’s industrial output, however, showed signs of decline in December 2012, due low manufacturing activity. This is 0.7% drop in growth as compared to the previous year. This is because India went from being agricultural economy to a services economy, while missing the industrial phase in between.
Since it is ideal to consider the latest fiscal years 2013 and 2014, we can maintain that India has a more stable economy than Japan, unlike the situation which was reversed while considering few years back. This is because India has maintained stable GDP growth rates.
A contributing factor to the rise of Indian economy, especially during the election year of India, is said to be the popularity of the newly appointed Prime Minister of India, Narendra Modi. He is known for his economic achievements in the state of Gujarat, during his reign as Chief Minister of the state. In Japan, the feature of bureaucracy is unique due to its dominating factor, unlike India, which is hugely democratic. Japan follows a near-monopolistic policy on economic decisions and business controls, which is seen in many developed countries. This dominance has been debated as to whether it is the reason for the “economic miracle” – its rise from a defeated country with a shattered economy to one of the largest economies in the world.
(n.d.). Retrieved from Ministry of Economy, Trade and Industry: http://www.meti.go.jp/english/
ET Bureau . (2014, April). India displaces Japan to become third-largest world economy in terms of PPP: World Bank. Retrieved from The Economic Times: http://articles.economictimes.indiatimes.com/2014-04-30/news/49523310_1_capita-income-third-largest-economy-world-gdp
Panda, A. (2014, May). World Bank: India Overtakes Japan as World's Third Largest Economy. Retrieved from The Diplomat: http://thediplomat.com/2014/05/world-bank-india-overtakes-japan-as-worlds-third-largest-economy/