World Bank says China and India are 40% smaller

According to a preliminary estimate by World Bank, economies of the two highest growing countries, China and India, are over estimated by about 40%. This estimate is based on purchasing power parity (PPP).

The Chinese economy's new estimate is 5.3 trillion dollar where as it was valued at 8.8 trillion dollars earlier. China is still the second largest economy of the world second only to US and ahead of Japan, Germany and India. China's share of World's GDP is estimated to be 9% which was earlier estimated to be 14%. Japan with 7% of World's GDP is third largest economy.

US contribution to World's GDP has dropped to 23% from 29% using exchange rate data. Still its far ahead of the second largest economy, China.

India's GDP estimate has been reduced from 6% to 4% of World's GDP. Earlier India was ranked fourth, now it has come to fifth with small gap with UK and France. World's economy was also overestimated. Together top five countries comprise of more than half of World's GDP.

The new ranking by World Bank is based on prices of 1000 goods and services. World Bank said that the earlier estimates were less reliable and for the first time China has participated in the World Bank’s International Comparison Program and India has done so first time after 1985.

This is the first major global comparison of this kind using data based on PPP. World Bank President Robert Zoellick, in Beijing, warned that even the new estimate is not totally correct and only reflects prices in the cities. He also said that this should not be used to measure poverty levels. "One has to be extremely careful about trying to draw judgements about poverty based on these statistics," said Zoellick. World Bank said, "These results are more statistically reliable estimates,... ...It was the most extensive and thorough effort ever to measure PPPs across countries." "We're working with the Chinese government to refine that work and as I think that will be out some time next year," he said.