Working Paper No.: WP 163 India at 125: Reclaiming the Lost Glory

In Page | 6 each case, the beginning point is the first year in which the growth rate shifted to a high- growth trajectory and is shown in parentheses following the country name in the first column. [...] To the extent that the proportionate change in the Chinese GDP deflator minus the proportionate change in the US GDP deflator exceeds the proportionate nominal depreciation of the Chinese currency, the growth rate of China’s GDP in constant local currency units underestimates the growth rate of its GDP in constant dollars and vice versa. [...] The real depreciation of the yuan cuts the growth rate in the constant local currency units by percentage points during the first of the four decades, while its real appreciation adds 1, 5.9, and 0.3 percentage points in the remaining three decades successively. [...] Tweaking these rates up or down by a half to one percentage point would advance or delay the timing of the switch in the ranking between the two countries by a few years, but it will have no real impact on the central question of the timing of the restoration of the old normal. [...] The fact that the decline in the growth rate in the second decade has been principally on account of the COVID-19 shock can be gleaned from the fact that the average growth rate during the last three years of this decade was just 3.5 per cent.