Terms-of-Trade Gains in India's Real Income, 1960–2025: An Exact Replication of the World Bank Adjustment, a Closed Form, and Why Its Level Depends on the Base Year

Real GDP measures output; real gross domestic income (GDI) also counts the purchasing power gained or lost when export prices move relative to import prices. I show that the World Bank's terms-of-trade adjustment is reproduced exactly, for 179 economies and 7,577 country-years (largest error 8.0e-15 of GDP), by exports deflated by the import deflator minus exports at constant prices. For India this gives the closed form TTF/GDP = x(Px/Pm − 1), where x is the constant-price export share, and the identity that GDI growth minus GDP growth equals the change in log(1 + TTF/GDP). India's adjustment was 3.33% of GDP in 2020, when import prices fell, and minus 1.93% in 1980. The annual gap between GDI and GDP growth has mean minus 0.012 points and standard deviation 0.812 points; the largest gap was minus 3.26 points in 2021. Over 1991 to 2025 the cumulative gap is only 0.19 points. I prove that the level of the adjustment is zero in the base year by construction and depends on the base year chosen: for 2022 it is about minus 0.56% of GDP with a 2005 base and minus 1.32% with a 2012 base, against zero with the current 2022 base. Across 128 economies the standard deviation of the gap is predicted well by the export share times the volatility of the terms of trade (correlation 0.809); India's 0.979 points is below the median of 1.411.