International Comparison Programme (ICP)

•  India is participating in the current phase of International Comparison Programme (ICP) with reference to 2017.
• It is a global statistical initiative that supports inter-country comparisons of Gross Domestic Product (GDP) and its components, using Purchasing Power Parity.

About International Comparison Programme

• The ICP is a worldwide statistical initiative led by the World Bank under the auspices of the United Nations Statistical Commission, with the main objective of providing comparable price and volume measures of gross domestic product (GDP) and its expenditure aggregates among countries within and across regions.
• Through a partnership with international, regional, sub-regional and national agencies, the ICP collects and compares price data and GDP expenditures to estimate and publish purchasing power parities (PPPs) of the world’s economies.

Purchasing Power Parities (PPPs)

• PPPs measure the total amount of goods and services that a single unit of a country’s currency can buy in another country.
• The PPP between countries A and B measures the number of units of country A’s currency required to purchase a basket of goods or services in country A as compared to one unit of country B’s currency to purchase a similar basket of goods in country B.
• PPPs can thus be used to convert the cost of a basket of goods and service into a common currency while eliminating price level differences across countries. In other words, PPPs equalize the purchasing power of currencies.
• Due to large differences in price levels across economies, market exchange rate- converted GDP does not accurately measure the relative sizes of economies and the levels of material well-being.
• PPPs make it possible to compare the output of economies and the welfare of their inhabitants in ‘real’ terms, thus controlling for price level differences across countries.
• Please also refer to our leaflet Fundamentals of Purchasing Power Parities on the basics of PPPs.

Uses of PPPs

• PPPs are widely used to convert national accounts data, like GDP, into a common currency, while also eliminating the effect of price level differences between countries. Since the demand for comparable volume aggregates is high, PPPs play a key role in the analyses carried out by policymakers, multilateral institutions, and private sector actors, among others.

By: Vishal