India pips UK to become world’s 5th largest economy; UK’s per capita GDP 7 times higher

India has become the world’s fifth-largest economy, overtaking the United Kingdom in end-March 2022, according to a Bloomberg report. The conclusion was based on IMF database and exchange rates. This is the second time India has beaten the UK in terms of economy, with the first one being in 2019.

As per the report, the size of the Indian economy with regards to ‘nominal’ cash was $854.7 billion during the quarter through March. On the contrary, the same for the UK was $814 billion. This was calculated on an adjusted basis and using the dollar exchange rate on the last day of the relevant quarter.

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The calculation is based on US dollars, with India further extending its lead in the first quarter of the current financial year, according to GDP figures from the International Monetary Fund (IMF).

Inflation in UK

UK is currently seeing its inflation grow by the fastest pace in four decades, and also faces a threat of a recession that may last well into 2024 as per the Bank of England. On the contrary, the Indian economy is forecast to grow more than 7 per cent this year.

India now trails behind the United States, China, Japan and Germany in terms of economy. A decade ago, India’s rank was 11th among the world’s largest economies, while UK was at Number 5.

As per the IMF’s forecast, India is set to take over the UK in dollar terms on an annual basis this year. The pound has fallen 8 per cent against the Indian rupee this year.

The report comes two days after government data showed that India’s gross domestic product (GDP) rose 13.5 per cent in the June 2022 quarter (Q1FY23) as compared with the 20.1 per cent growth registered in Q1 2021-22.

High population, low income

However, to see this development in perspective two things need to be kept in mind — one, the size of population and arising from it, GDP per capita.

As of 2022, India’s population is 1.41 billion while the UK’s population is 68.5 million, 20 times less than India. And, this gap is unlikely to be bridged in a hurry.

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This huge difference in population leads to an equally huge difference in GDP per capita. Unsurprisingly, the income of an average Indian is far lower than of a person in UK. As per 2020 figures according to ourworldindata.org, India’s GDP per capita is $6,166 GDP per capita while for UK the figure is $42,676.