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
Britain has dropped behind India to become the world’s sixth largest economy, delivering a further blow to the government in London as it grapples with a brutal cost-of-living shock.
The former British colony leaped past the UK in the final three months of 2021 to become the fifth-biggest economy. The calculation is based in US dollars, and India extended its lead in the first quarter, according to GDP figures from the International Monetary Fund.
The UK’s decline down the international rankings is an unwelcome backdrop for the new prime minister. Conservative Party members choose Boris Johnson’s successor on Monday, with Foreign Secretary Liz Truss expected to beat former Chancellor of the Exchequer Rishi Sunak in the run-off.The winner will take over a nation facing the fastest inflation in four decades and rising risks of a recession that the Bank of England says may last well into 2024.
By contrast, the Indian economy is forecast to grow more than 7 per cent this year. A world-beating rebound in Indian stocks this quarter has just seen their weighting rise to the second spot in the MSCI Emerging Markets Index, trailing only China’s.
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, UK was $816 billion.
The calculations were done using the IMF database and historic exchange rates on the Bloomberg terminal.
The UK is likely to have fallen further since. UK GDP grew just 1 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.
”Proud moment for India to pip the UK, 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 $47,00 We have miles to go… Let’s be at it!,” Uday Kotak, CEO of Kotak Mahindra Bank, said in a tweet. India has a population 20 times that of the UK and so its GDP per capita is lower.
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.
Asia’s third-largest economy faces headwinds from higher energy and commodity prices that are likely to weigh on consumer demand and companies’ investment plans. Also, consumer spending, which accounts for nearly 55 per cent of economic activity, has been hit hard by soaring food and fuel prices. The GDP growth in the first quarter of the current fiscal was higher than China’s 0.4 per cent expansion in April-June.