India’s PPP GDP Growth: Is This The Most Underrated Part Of Its Economic Story?

It is now 25 years into the new century. India has developed significantly over the course of this time.

This development is described in many ways. The commonest economic metric is the Gross Domestic Product or GDP - the aggregate value of goods & services produced in an economy in a year. 

The normalisation of the cost of goods and services in terms of purchasing power is particularly critical when one considers just how much purchasing power varies. The simplistic thinking is that all developed countries have a generally similar purchasing power and developing countries all fit in a different more affordable basket. But reality is different. The following is the ratio between purchasing power based GDP and nominal (exchange rate based) GDP for some major economies.

It’s clear that while major developed nations all have purchasing power multipliers within a reasonable range, developing countries are widely spread apart, not just amongst themselves, but versus developed countries. 

What does this mean ? Practically this implies that the cost of living in India is broadly a quarter of that in the US. Seen at an individual level, the average person has the ability to buy far more than the value of his rupee income looks like in US dollars within India. In the rest of this article we will look at how India’s GDP in PPP terms has evolved over time and how it relates to standard of living. 

A Comparative Visual Timeline of Growth 

Green indicates that the country in question was richer in terms of PPP GDP on a per capita basis. Red indicates India ranked higher. Cream indicates near parity. 

This was the reality then - despite having only half of the population today, India had the same per capita purchasing power as Chad. Almost all of Africa was richer, including most of its poorest part - Sub-Saharan Africa. 

In Asia there are a handful of countries with lower per capita income - Afghanistan, Nepal, Bangladesh, North Korea and Cambodia. In 2000, Pakistan had a higher PPP GDP than China did - both far ahead of India. 

In 2015 India has slowly shed equivalence to Sub-Saharan Africa, and started to catch up to the bottom tier of the Americas in PPP GDP per capita. This was after close to 25 years of liberalization. In effect, Indian GDP growth at lower income levels was good but not groundbreaking. Now let us look at 2025 - the present day. 

Let’s start with Africa again: 

India has a per capita PPP GDP on par with Lebanon, exceeding Yemen, Syria, Palestine and Jordan. 

This progress is sometimes characterized negatively as “those are mostly war-torn countries, it’s not a big deal”. But it is - India was so far behind the curve that it took until 2025 to get here. As recently as the mid 2000s, India was still trending on par with Sub-Saharan Africa in terms of per capita PPP GDP and Human Development Index (HDI) - in fact India entered the ranks of High HDI in 2025 as well. 

An implicit message in the above visual progression is that Indian per capita PPP GDP growth has shown an accelerating trend. This is more easily seen in the following figure:

While it took India thirteen years to go from $1000 to $2000 in per capita PPP GDP, it took a year to cover thousand dollar increments from $8050 per capita PPP GDP in 2021 to $12000 in 2025. 

Given the differential in growth rates, India will overtake Philippines in per capita PPP GDP within the next year and will likely catch up with Indonesia, which is at $17000 to India’s $12000, around the end of the decade. At between $18000-22000 per capita PPP GDP, India will overtake the first couple of European countries - Kosovo, Moldova and Ukraine. 

India adds 5 Sri Lankas or approximately 1.1x to 1.2x Bangladesh or Pakistanis economies to its economy every year. Note that the Indian data is the incremental GDP added each year. For all others, it is the total size of their economies. 

There is no other regional body where one member adds more than the total sizes of every other country in that organization to its own economy every year. In fact India adds almost an entire SAARC to its economy every two years. Maharashtra alone is a much larger economy than any SAARC country. By 2030, Tamil Nadu, Uttar Pradesh, Gujarat and Karnataka will also have larger economies. 

India adds more electrical installed capacity each year than the total installed capacity of Bangladesh or Pakistan. It produces more steel annually - 150 million tons - than all steel ever produced in Pakistan or Bangladesh in all of their history. In comparison, even NAFTA is less lopsided - Canada and Mexico are industrialized nations. 

Conclusion 

The good news however - is that over the past decade it has hit several milestones. It achieved total electrification by 2020 - almost twenty years behind China. It almost entirely eliminated absolute poverty.

Between the 2014 and 2025, it traversed the entire range from low HDI to high HDI today. The most notable result is that these wins are resulting in faster per capita PPP GDP growth rate - not just benchmarked against prior Indian performance, but better than the ASEAN,equal to or better even than China at this income level.

While enormous challenges remain, the cold data driven view here is that substantial success - as benchmarked against the fastest growing economies - has also been accomplished.