WORLDS ' FIFTH BIGGEST ECONOMY

Why in news?

 India has become the world’s fifth-largest economy after it overtook the United Kingdom in end-March 2022, according to the latest calculations by Bloomberg.

Key takeaways

• India leapt past the UK in the final three months of 2021 to become the fifth-biggest economy. The calculation is based on US dollars, and India extended its lead in the first quarter, according to GDP figures from the International Monetary Fund.
• 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.
• The Indian 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, the UK was $816 billion.
• UK 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 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.
• A decade ago, India ranked 11th among the largest economies, while the UK was 5th.

Comparing India and the UK

Population size 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.

 GDP per capita

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. It is not surprising to note that the income of an average Indian is far lower.

Poverty:

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.

The 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. Despite its secular improvement, India might still take a decade to be where the UK was in 1980.

The quality of life:

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, newborn 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.