The PWT are an ambitious attempt to arrive at macro economic aggregates for long time series which are comparable across countries. The PWT estimates are better at showing differences in income after compensating for differences in purchasing power between countries.
For example, in 1990-91, India's total GDP was Rs.5,308 bln. or Rs.6,327 per capita. Using the nominal exchange rate at that time of Rs.17.95 per dollar, this gives India's total GDP of $296 bln, or $352 per capita.
This is an exceedingly misleading picture, because $352 would not be able to buy a standard of living in the USA which is comparable with what Rs.6,327 could purchase in India. This is because the nominal exchange rate reflects only the currency's relative purchasing power of traded goods, whereas GDP comparisons are effectively concerned with respect to all goods and services.
The PWT estimates give us a much more meaningful method of making such comparisons across countries. The PWT estimates show India's per capita GDP in 1990 as being $1252 which is a correction factor of roughly three and half times to the figure of $352.
Centre for Monitoring Indian Economy, Bombay
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Last updated: May 1995.