'Wrong numbers compared; Bangladesh hasn't, unlikely to surpass India': Ex-CEA on GDP per capita comparison

1/ The India-vs.-Bangladesh GDP per capita comparison (post @IMFNews WEO) has sparked anxiety & acrimony

But wrong numbers being compared

NO, on more appropriate metric, India has not been surpassed and, according to IMF, unlikely to be in near future pic.twitter.com/hdJskGbTBY

"GDP per capita is an 'estimate' for one 'indicator' of the average standard of living/welfare in a country. Note the 2 caveats, it is only one indicator, there are many others (eg. human development index) and even as that indicator, GDP can be measured in many ways. We need to measure 'real' GDP in local currency after taking out effects of inflation and then, convert all local currency estimates of real GDP into comparable dollars, Many ways of doing this (IMF has 3, World Bank has 4)," he tweeted in a thread.

He said the focus has been on comparing the countries' GDP based on current, market exchange rates which yields the "conclusion" of Bangladesh eclipsing India. "But market exchange rates not appropriate for welfare comparisons across time and countries because they may not adequately reflect domestic inflation and/or productivity growth. More appropriate basis is GDP at constant, purchasing power parity (PPP) exchange rates. This shows India ahead and despite COVID's more adverse impact in 2020, likely to remain so," said the former CEA.

4/ All the focus has been on comparisons based on GDP measured at current, market exchange rates

This yields "conclusion" of Bangladesh eclipsing India

But market exchange rates not appropriate for welfare comparisons across time & countries because pic.twitter.com/e68jcqMdBY

Arvind Subramanian (@arvindsubraman) October 16, 2020

"BUT important caveats. IMF's historical numbers are themselves based on countries' local currency GDP estimates which are subject to uncertainty for both India and Bangladesh. And IMF forecasts can also be off," stated Subramanian.

While his statements might come as optimistic, he also said that India has a long fight ahead. Subramanian pointed out that India's growth was slowing down before COVID-19 came along to rampage. The impact of coronavirus has also been severe in India. "India will return to pre-covid 'LEVEL' of real per capita GDP only in 2022, 3 lost years," he warned.

7/ And important policy lessons

India has no room for complacency

It was slowing pre-Covid: https://t.co/BYuUMfDXvs

And Covid impact severe: for example, India will return to pre-covid *LEVEL* of real per capita GDP only in 2022, 3 lost years pic.twitter.com/vDZUdmMbtt

Arvind Subramanian (@arvindsubraman) October 16, 2020