India: 5th Largest Economy now
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- India has overtaken the U.K. to become the world's fifth-largest economy. It is is now behind only the US, China, Japan and Germany, according to IMF projections.
Dollar Exchange Rate
- 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 U.K. was $816 billion.
- India's GDP expanded 13.5% in the April-June quarter, the quickest pace in a year, to retain the world's fastest growing economy tag.
- India’s GDP growth in the first quarter of the current fiscal was higher than China's 0.4% expansion in April-June.
- The growth, though lower than the Reserve Bank of India (RBI) estimate of 16.2%, was fuelled by consumption and signalled a revival of domestic demand, particularly in the services sector.
- Pent-up demand is driving consumption as consumers, after two years of pandemic restrictions, are stepping out and spending.
- The services sector has seen a strong bounce back that will get a boost from the festival season next month.
- But the slowing growth of the manufacturing sector at 4.8% is an area of worry. Also, imports being higher than exports is a matter of concern.
- Additionally, an uneven monsoon is likely to weigh upon agriculture growth and rural demand.
- The GDP tag will, however, allow the RBI to focus on controlling inflation, which has stayed above 6% for seven straight months.
Overview on the basis of other parameters
However, here are five charts that should serve to see this development in perspective.
#1 Population size
This is one of the most fundamental differences between the two countries. As of 2022, India has a population of 1.41 billion while the UK’s population is 68.5 million. In other words, India’s population is 20 times that of the UK’s. This gap is unlikely to be bridged in a hurry.
#2 GDP per capita
Since there is such a stark difference between the population of the two countries, GDP per capita provides a more realistic comparison of income levels because it divides a country’s GDP by the population of that country. The income of an average Indian is far lower.
#3 Poverty levels
Low per capita incomes often point to high levels of poverty. It is noteworthy that at the start of the 19th century, the UK’s share in extreme poverty was considerably higher than India’s. However, as things stand today, the relative positions have reversed even though India has made giant strides in curbing poverty.
#4 Human Development Index
Arguably, the end goal of higher GDP and faster economic growth is to have better human development parameters. The Human Development Index is a composite of health, education and standard of living parameters. India standing on HDI with the UK’s has huge contrast. Despite its secular improvement, India might still take a decade to be where the UK was in 1980.
#5 Universal Healthcare Coverage
A crucial element of becoming richer as a country is the quality of life available to citizens. The Universal Health Coverage (UHC) Index is measured on a scale from 0 (worst) to 100 (best) based on the average coverage of essential services including reproductive, maternal, new-born and child health, infectious diseases, non-communicable diseases and service capacity and access.
While faster economic growth and the government’s policy focus on healthcare schemes since 2005 have made a distinct improvement for India, there is still a long way to go.
- A decade back, India was ranked 11th among the large economies while the U.K. was at the fifth position.
- moving past one of the biggest economies in the world, especially one that ruled over the Indian sub-continent for two centuries, is a major milestone.