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India overtakes UK as world's Fifth Largest Economy

India has moved past the United Kingdom in the last three months of 2021 to become the fifth-biggest economy in the world.


Meanwhile, Britain has dropped behind India to become the world's sixth largest economy, delivering a blow to the government in London as it grapples with a brutal cost-of-living expenses.


India moved past the UK in the final three months of 2021 as the fifth-biggest economy. The calculation is based in United States dollars, and India is extending its lead in the first quarter, according to GDP figures from the International Monetary Fund.


The United Kingdom's decline down the international rankings is an unwelcome backdrop for the new prime minister. Conservative Party members chose Boris Johnson's successor on Monday, with Foreign Secretary Liz Truss expected to defeat former Chancellor of the Exchequer Rishi Sunak in the run.


England is currently facing the fastest inflation in four decades while facing rising risks of a recession that Bank of England says may last well into 2024.


By contrast, the Indian economy is forecast to grow by more than 7% this year. A world-record rebound in Indian stocks this quarter has led its rise to the second spot in the Morgan Stanley Capital International (MSCI) Emerging Markets Index, only behind China.


On the basis of 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. Similarly, the UK economy was equal to $816 billion. The calculations were done using the International Monetary Fund (IMF) database and historic exchange rates on the Bloomberg terminal.


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


 


The IMF forecasts show India overtaking the UK in dollar terms on an annual basis this year, putting the nation behind US, China, Japan and Germany. A decade ago, India ranked 11th among the largest economies, while the UK was 5th.


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