India pips UK to emerge world's fifth biggest economy
07 September 2022
India’s economy took a leap in the final three months of 2021 to become the fifth-biggest economy overtaking the UK, and looks set to overtake Germany in 2027 and most likely Japan by 2029 at the current rate of growth, projections by various agencies showed.
A ranking, based on GDP figures compiled by the International Monetary Fund, showed that India extended its lead in the first quarter.
On an adjusted basis and using the dollar exchange rate on the last day of the relevant quarter, the size of the Indian economy in “nominal” cash terms in the quarter through March was $854.7 billion. On the same basis, the UK economy was $816 billion-strong, according to a Bloomberg report.
“India has undergone a large structural shift since 2014 and is now the 5th largest economy. Interestingly, India had surpassed UK as the 5th largest economy as early as December 2021 itself and not recently as is being claimed. The share of India’s GDP is now at 3.5 per cent, as against 2.6 per cent in 2014 and is likely to cross 4 per cent in 2027, the current share of Germany in global GDP!,” says Economic Research Department of the State Bank of India (SBI).
The report, authored by Soumya Kanti Ghosh, Group Chief Economic Adviser of the state-owned SBI, further states that the Indian economy jumped five places from 2014, when it was ranked number ten.
“India’s GDP growth in Q1 FY23 was 13.5 per cent. At this rate, India is likely to be the fastest growing economy in the current fiscal. Interestingly, even as estimates of India’s GDP growth rate for FY23 currently range from 6.7 per cent to 7.7 per cent, we firmly believe that it is immaterial. In a world that is ravaged by uncertainties, we believe 6 per cent to 6.5 per cent growth is the new normal,” the report noted.
The IMF’s own forecasts show India overtaking the UK in dollar terms on an annual basis this year, putting the Asian powerhouse behind just the US, China, Japan and Germany. A decade ago, India ranked 11th among the largest economies, while the UK was 5th.
The UK is likely to have fallen further since the British economy is facing the fastest inflation in four decades amidst rising risks of a recession that the Bank of England says may last well into 2024.
UK GDP grew just one per cent in cash terms in the second quarter and, after adjusting for inflation, shrank 0.1 per cent. Sterling has also underperformed the dollar relative to the rupee, with the pound falling 8 per cent against the Indian currency this year.
By contrast, the Indian economy is forecast to grow more than seven per cent this year.
However, the latest government figures show that India’s per capita income, or the average income earned per person in a year, remains depressingly low at pre-pandemic levels of Rs91,481. India’s per capita income in 2019-20 was Rs94,270 before it slid to Rs85,110 in 2020-21 due to the Covid-19 disruption.