India has left behind the United Kingdom to become the world’s 5th largest economy. As per IMF projections, India is now following only the United States, China, Japan, and Germany in terms of economy.
A decade ago, India was ranked 11th position among the largest economies, while the United Kingdom ranked on fifth place. With record-breaking growth in the first quarter of 2022, the Indian economy has now surpassed the United Kingdom, which is now the sixth largest economy. The growth of economies is assessed by Bloomberg, which leverages IMF (International Monetary Fund) database and historical exchange rates.
According to the Bloomberg report, the size of the Indian economy in the first quarter was $854.7 billion, while the United Kingdom’s economy accounted for $816 billion. As India is expected to continue as the world’s fastest-growing economy, its lead over the United Kingdom will broaden in the upcoming time.
What does it mean for India?
Uday Kotak, CEO of Kotak Mahindra Bank, considered it a proud moment for India, but he also emphasised a reality check of the population denominator: India 1.4 billion Vs UK 0.068 billion. Therefore, the per capita GDP of India is $2,500 vs the UK’s $47,000. India has 20 times more population than the United Kingdom, so the GDP per capita is quite lower. We still have a long way to cover.
India’s GDP registered a growth rate of 13.5% in the first quarter of 2022, the fastest rate in a year, preserving the tag of the world’s fastest-growing economy, but increasing interest rates and the worldwide threat of inflation can slow down the speed of growth in upcoming quarters. However, the growth rate is lower than the RBI’s expectation of 16.2%.
Also read- India’s Q1 GDP Numbers Are Out
After two years, the consumption rate is mounting once again as customers are now stepping out and spending money on products and services. The service sector has also witnessed solid growth, which will see a surge during the festival season. But, the slow growth of the manufacturing industry at 4.8% and higher imports than exports are major concerns. Besides, the uncertain monsoon can cause focusing on agricultural growth and rural demand.
- GDP per capita provides a more clear picture of a country’s growth and the income levels of its individuals. In India, GDP per capita is $2500, while it is $47000 in the United Kingdom.
- The rapid growth of India’s GDP and its ranking as the fifth largest economy in the world would help India to improve its poverty levels.
- The ultimate goal of higher GDP and rapid economic growth is to perform better on the Human Development Index. This index is a composite of health, education, and living standard parameters. So, it is anticipated that India will strengthen its position in HDI gradually.
- Growing richer as a country means an enhanced quality of life, which is commonly measured through the UHC (Universal Health Coverage) index. Therefore, being the 5th largest economy will improve India’s position on the UHC index.
How does it affect the Indian economy?
The impression of GDP in the first quarter will allow RBI to have a command of inflation, which remained above the 6% for seven consecutive months. CBI (The Central Bank of India) has increased the benchmark policy rates by 140 basis points in three phases since May and is committed to making further efforts to control inflation. Regardless of strict monetary conditions, India is witnessing higher energy and commodity prices, which will impact customer demand.