In the final three months of 2021, India leaped past UK to become the fifth-biggest economy.
New Delhi: In a major development, Britain has dropped behind India to become the world’s sixth largest economy. This delivers a further blow to the Britain government as it fights a brutal cost-of-living shock.
In the final three months of 2021, India leaped past UK to become the fifth-biggest economy. A decade ago, India ranked 11th among the largest economies, while the UK was fifth. Notably, 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 (IMF).
For the new Prime Minister of UK, the country’s decline in the international rankings is not a welcome backdrop. Conservative Party members will 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.
However, whoever wins will take over a country which is facing the fastest inflation in the last four decades and an ever-rising risk of recession. According to the Bank of England, the recession may last well into 2024.
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Meanwhile, in a stark contrast, India’s 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, 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’s 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.
(With agency inputs)