Global Affairs Desk

Tue Jun 18 2024

India overtakes UK to become fifth-largest economy

~ By Aarush on 9/4/2022

India overtakes UK to become fifth-largest economy

India has overtaken the UK to become the fifth largest economy in the world. Economists and business executives anticipated that India's position would continue to improve in the years to come due to greater economic growth. According to figures published by the International Monetary Fund, India passed the United Kingdom (UK) to become the fifth-largest economy in the world in the last quarter of 2021. The calculation is based on US dollars, and India extended its lead in the first quarter, according to GDP figures from the International Monetary Fund.

India's economy currently ranks just four nations ahead of it in terms of size in dollars. The United States, China, Japan, and Germany are the only nations with economies larger than India's. The UK is currently in sixth place, just behind India. The UK is currently facing its fastest inflation in four decades and rising risks of a recession that the Bank of England says may last well into 2024.

As the UK continues to navigate through the difficult waters of political uncertainty, the country has been climbing down the rungs of international rankings. 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.

By contrast, the Indian economy is forecast to grow more than 7% 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, the UK stood at $816 billion.

The UK is likely to have fallen further since. UK GDP grew just 1% in cash terms in the second quarter and, after adjusting for inflation, shrank 0.1%. Sterling has also underperformed the dollar relative to the rupee, with the pound falling 8% against the Indian currency this year.

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.

Economic growth and political stability of a country are deeply interconnected. The uncertainty associated with an unstable political environment may reduce investment and the pace of economic development. On the other hand, poor economic performance may lead to government collapse and political unrest. India's economic growth can be attributed to the certainty in the political climate of the country.

While India has overtaken the United Kingdom in terms of the size of the economy, the per capita income in India remains very low. When it comes to per capita income, which is a measure of how much money is made per person in a country, India is ranked 122 out of 190 countries.

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