India, China Shrink

The Indian and Chinese economies are nearly 40 percent smaller than originally thought, according to the World Bank.

The Bank’s updated method for calculating purchasing power parity (PPP), which converts a country’s gross domestic product (GDP) by accounting for its relative purchasing power (a dollar will buy far more food in India than in Europe, for example), effectively lowered the size of both countries’ economies by 40%.

Using the new method, China is still ranked the world’s second-largest economy, with 9.7% of the world’s GDP, behind the U.S., which accounts for 23 percent. However India’s ranking slipped one notch. Japan ranked third, Germany fourth and India came in fifth, with nearly 4% of total world output.

Together, those five countries account for half of world economic output.