The milestone of India overtaking the UK as the fifth largest economy seems to be just a teaser; the full picture is yet to unravel as greater laurels beckon. India remains the fastest growing economy in the world despite the wide spread gloom; a blip here or there must not cause worry as India poised to achieve bigger things.
India is now among the five most distinguished economies in the world with only the United States of America, China, Japan and Germany ahead of it.
India’s share in the Global GDP in 2022 is projected at 3.5 per cent, taking over the UK’s share at 3.3 per cent. At 4.8 per cent and 4.1 per cent, India is closing the gap with Japan and Germany. The US accounts for 24.1 per cent while China, at 19.8 per cent, is at the second spot.
India was at the 11th spot almost a decade ago and the UK was at the fifth spot. India continues to be the third biggest economy in Asia.
The assumption that India has overtaken the UK is based on calculations by Bloomberg using the International Monetary Fund (IMF) database and historic exchange rates on its terminal, a PTI report said.
The Bloomberg report has premised its calculations upon the Dollar-Rupee exchange rates on the adjusted basis as on the last day of the April-June quarter. “The size of the Indian economy in ‘nominal’ cash terms in the quarter through March was USD 854.7 billion. On the same basis, the UK was USD 816 billion,” stated a Bloomberg report.
What is significant is that the gap between the sizes of the two countries will only widen going forward as, even by conservative estimates, India is still expected to grow at 7 per cent.
Interestingly, a note by economists at the State Bank of India (SBI) stated that the Indian economy overtook the UK in December 2021 itself to become the fifth largest in the world. “(India) is now the 5th largest economy. Interestingly, India had surpassed the UK as the 5th largest economy as early as December 2021 itself and not recently as is being claimed,” this PTI report said quoting the note.
While, India is still far behind the UK in terms of per capita Gross Domestic Product (GDP) and that is because of the former’s larger population. At around USD 2500 India has a tremendous task at hand to match the UK’s per capita GDP of USD 47,000 though.
Indian Economy – How is it shaping up?
India’s potential as a nation is huge. It has the second largest work force in the world, has significant young population with huge market opportunities for virtually every business. China’s image as a manufacturer for the world has taken a severe beating in the aftermath of the Coronavirus Pandemic. Moreover, its appetite and compulsion for expansion has also been a topic of discussion across continents.
The world is looking at ‘China plus one’ strategy and India fits the bill in good measure. India could potentially be a global bellwether for manufacturing and services sector.
The slowdown in China is advantage India.
In a recently release report by the SBI, India will likely become the third largest global economy by 2029.
The Indian government is spending massively on creating infrastructure, encouraging industries to build capacities for manufacturing for the world through the Production Linked Incentives (PLIs) and simplifying processes for ease of doing business. The work being done now is expected to show results in due course.
After the onslaught of the pandemic, we can safely say that the worst is behind us. It is not to say that there are no challenges. Inflation remains the biggest concern for all economies and the world does not want another disruption after the Russia-Ukraine conflict which does not seem to end even after the two countries being into the war for more than 100 days.
To its credit, India has been able to sustain its growth momentum. In the recently announced GDP numbers for Q1 of FY23, the growth was at 13.5 per cent and highest for any major economy in the world.
Most economic indicators were reported positive for July. The direct tax collections are on the up. The monthly Goods and Services Tax (GST) collections remain robust. In July, they were over Rs 1.4 lakh cr. The Index of Industrial Production (IIP) continued to be in expansion mode. The banks witnessed credit growth as far as the industry is concerned with small businesses accounting for significant share.
The automobile sector also reported good growth in all segments be it passenger vehicles, two wheelers and commercial vehicles and most companies registered a YoY growth. This sector has been bleeding amid slowing demand and shortage of chips. The problem of chips is now largely resolved and we are heading to a long festive and marriage season. That augurs very well for most businesses.
The weakening of Rupee seems to be an immediate problem but many economists have argued that the Indian Rupees is competitively priced against the US Dollar. It has done better than most other top currencies.
A blip here or there leading to revisions in growth outlook from credit rating agencies must not cause too much of worries as the fundamentals remain strong. India will remain a silver lining amid the widespread gloom.