ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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How Meaningful Is the Exercise for India?

International Comparison Program of the World Bank

Are the purchasing power parities estimated by the International Comparison Program all that meaningful for large countries such as India and China? The article provides empirical evidence from India that suggests that the ICP practice of providing economy-wide PPPs that treat all countries (large and small) as single entities severely limits its usefulness. It also provides evidence that questions the usefulness of multilaterally determined PPPs in the context of bilateral comparisons between countries far removed from the numeraire country, namely, the United States. This note also argues that the lack of price information that is relevant for the poor severely limits the usefulness of the ICP PPPs in the poverty comparisons. Some suggestions are provided for improving the relevance and usefulness of the ICP.

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