India, which was once dominated by Britishers and Britain when our natural and human resources were abused for their own country’s development, has now surpassed the UK to become the world’s fifth largest economy. A decade ago, India was ranked 11th among large economies, while the United Kingdom was ranked fifth. However, according to IMF forecasts, India surpassed their past ruler, UK, which is now ranked sixth, to become the world’s fifth largest economy, trailing only the United States, China, Japan, and Germany.
The idea that India surpassed their past ruler, UK, is supported by estimates made by Bloomberg using the IMF database and historical exchange rates on its terminal. “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 U.K. was $816 billion,” stated a Bloomberg report.
This fact is also corroborated by the government’s GDP growth rate, which was recently disclosed. According to Government’s data, India’s GDP rose 13.5% in the April-June quarter, the strongest pace in a year, allowing it to maintain its position as the world’s fastest expanding economy. GDP growth of 13.5% YoY compares to a 20.1% expansion a year back and 4.09% growth in the previous three months to March. However, the prospect of a global recession and rising interest rates could stifle growth in the next quarters.
Going forward, India will face a number of challenges including a decreasing manufacturing sector growth rate of 4.8%, a worrying import to export trade deficit, and an erratic monsoon anticipated to have an adverse impact on agricultural growth and rural demand. In addition, the benchmark policy rate was increased by 140 Bps since May to manage inflation. To combat this, however, pent-up demand is fuelling consumption as consumers are stepping out and spending after two years of pandemic restrictions. Even the services sector has seen a strong bounce back that will get a boost from the festival season next month.
“While the world is on the brink of a recession, India is growing by 7 per cent. There is inflation of 10 per cent in the UK, 9 per cent in the United States of America while in India it 6-7 per cent, which is normal. It is good news for all Indians before the auspicious occasion of Diwali,” Charan Singh, economist, and chief executive of EGROW told ANI.
While there has been much jubilation over India’s inclusion in the top five economies in the world, it should be recalled that the country has a population 20 times larger than the United Kingdom, which results in a lower GDP per capita. As India had surpassed the UK in 2019 as well, to take the fifth-largest economic position in the world, but it has fallen back to sixth place in 2020. This could be attributed to the pandemic which started in 2020, thereby affecting every economy of the world.
“Proud moment for India to pip the U.K., our colonial ruler, as the 5th largest economy: India $3.5 trillion vs UK $3.2 trillion. But a reality check of population denominator: India: 1.4 billion vs UK 0.068 billion. Hence, per capita GDP we at $2,500 vs $47,000. We have miles to go… Let’s be at it!” Uday Kotak, CEO of Kotak Mahindra Bank, said in a tweet.
Therefore, to achieve higher levels of growth in future and for it to become USD Five trillion economy by 2028-29 as stated by former RBI Governor D Subbarao, India’s GDP needs to grow by 9% Per Annum for next five years. Whereas, according to a State Bank of India (SBI) research report, India would surpass Germany in 2027 and Japan by 2029 if it continues its present rate of growth. The path taken by India since 2014 reveals India is likely to get the tag of 3rd largest economy in 2029, a movement of 7 places upwards since 2014 when India was ranked 10th. At its present rate of expansion, India should exceed Germany in 2027 and Japan, most likely, by 2029.
“Before 2014, we were in fragile five economies. It is a huge feat to become the 5th largest economy and surpass an economy like Britain from that position,” said Meenakashi Lekhi, Minister of State for External Affairs and Culture.
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