Consider the following statements:

1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries.

2. In terms of PPP dollars, India is the sixth largest economy in the world.

Which of the statement given above is/are correct?

Correct Answer: Option 1 only

Let us analyze both statements step-by-step to understand the logic behind the correct answer:

Analysis of Statement 1:

Purchasing Power Parity (PPP) is an economic metric used to compare economic productivity and standards of living between countries. The PPP exchange rate measures how much of a currency is required to buy the exact same basket of goods and services in two different countries. Therefore, PPP exchange rates are indeed calculated by comparing the prices of identical baskets of goods and services across nations. Thus, Statement 1 is correct.

Analysis of Statement 2:

In terms of Purchasing Power Parity (PPP) dollars, India is currently the third-largest economy in the world, positioned after China (1st) and the United States (2nd). Statement 2 claims that India is the sixth-largest economy in terms of PPP, which is incorrect. (Note: India is the fifth-largest economy in nominal GDP terms, but third-largest in PPP terms). Thus, Statement 2 is incorrect.

Conclusion:

Since only statement 1 is correct, the right option is 1 only.