Is the rate of growth of GDP the real measure of growth of an economy?

Is GDP in terms of growth in USD, the real measure of growth of a country?

There are better methods for computation of growth than the numbers of GDP. Some of them are-

1. GDP-PPP clubbed together for a country for the real terms of growth

2. GDP-PPP in terms of the local currency for a country as real terms of growth

3. PPP in per capita income as a measure of growth for a country in real terms of growth

4. PPP in per capita income as a measure in the local currency as real terms of growth

5. Per Capita income growth as a measure in the local currency as real terms of growth.

 

GDP stands for Gross Domestic Product, and PPP as Purchasing Power Parity, & Per Capita Income as GDP to Population Ratio.

Let us take this story as an example. In the USA, 1 burger costs USD 3, while in India INR 30. Now if we divide 30/ 3, we get 10. Hence, in PPP terms, 1 USD is equal to INR 10. Hence an equivalent GDP of USD 1 Trillion for the USA would be same as USD 100 billion USD for India. Or, in terms of PPP, a trillion dollar economy will be a 100 billion dollar economy for India. Hence, an absolute measure of USD in terms of percentage growth and absolute terms will be less effective than the one in equivalent PPP terms, measured in terms of relative growth!

Here is what The Economist has to say!

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