USD 5 trillion economy: The curious case of India’s rise to the top 5

In 2022, the IMF projects India’s $3.53 trillion economy to overtake Britain’s $3.38 trillion.
Image used for representational purpose. (Soumyadip Sinha, Express Illustration)
Image used for representational purpose. (Soumyadip Sinha, Express Illustration)

Did India break into the top league as the world’s fifth-largest economy taking over the UK? It did, but didn’t. According to the IMF, in 2019, India became the world’s fifth-largest economy with a nominal GDP of $2.94 trillion overtaking France ($2.71 trillion) and the UK ($2.83 trillion). But the trouble with GDP numbers is that they undergo a series of revisions and the final data comes only with a lag of 2-3 years. In other words, first estimates of national output are ballpark figures and are subjected to revisions, both upwards and downwards.

So, India’s $2.94 trillion for 2019 was revised down to $2.83 trillion, while France’s and the UK’s were revised upward to $2.73 trillion and $2.88 trillion, respectively. The joy was shortlived and what seemed like cracking into the top 5, overtaking our colonial masters Britain didn’t materialise even now with India settling at the sixth spot since.

The good news is, Asia’s third-largest economy is likely to not only break into the top 5 this fiscal, but also move one spot ahead to takeover Germany in the next 5 years, as per the latest IMF projections. The forecasts are somewhat believable this time around given the gap between projected output between India and the UK for this year, and between India and Germany for 2027 are a good $20 billion-plus, which means, despite factoring a downward revision in both first and second estimates, chances are that India’s spot in the top five appears confirmed.

In 2021, India’s GDP stood at $3.18 trillion, just a notch below the UK’s at $3.19 trillion. Of course, these numbers are subject to revision, but the fact remains that the Indian economy is closing the gap faster. The pace of output growth is slowing down in the UK, thanks to Brexit uncertainity, Covid-related disruptions and the ongoing Ukraine-Russia war is also adding to India’s ascent.

In 2022, the IMF projects India’s $3.53 trillion economy to overtake Britain’s $3.38 trillion. By 2027, the UK’s economy will be at $4.55 trillion, while India would have surpassed it with a neat $1 trillion margin settling at $5.53 trillion. And if the forecasts are anything to by, India is all set to even dethrone Germany, whose nominal GDP is estimated at $5.36 trillion by 2027, to emerge as the world’s fourth largest economy.

At the third spot is Japan, whose economy is likely to grow from $4.91 trillion in 2022 to $6.26 trillion. That’s less than a $1 trillion gap with that of India’s $5.53 trillion and provided there are no major setbacks and if the 7-8% real GDP growth rate continues, the target to compete with Japan’s third spot is doable and not really over ambitious either. But breaking into the next phase from thereon would be both challenging and interesting. By 2027, China’s economy at an estimated $29.13 trillion would be at a kissing distance to takeover the US ($30.97 trillion) as the world’s largest economy. From the 9th spot in 2010 trailing countries like Brazil and Italy, India’s rise has been dramatic in the past two decades and will be keenly watched.

The IMF, which predicted in April this year that India can not become a $5 trillion economy until 2028-2029 has reworked its forecast early this month. As per the revision, India will be a $5 trillion economy by 2026-2027, two years earlier than they initially predicted and a $5.5 trillion economy in FY28 or calendar year 2027. The change in forecast was due to the assumption that the rupee will depreciate to 84 against the dollar and not 94, as per the IMF.

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The New Indian Express