India misses fifth-largest economy in the world tag by $13 billion

The Indian economy was slightly smaller than the United Kingdom’s (UK’s), which deprived the former the rank of the fifth-largest economy in the world in 2021. Experts say it is just a matter of a year before India overtakes the UK.

It should be noted that the figures for other countries are on a calendar year basis, while those for India are on a fiscal year basis (April-to-March). So, 2021 would mean 2021-22 for India and so on.

If the figures are rounded off, both the economies were placed at $3.2 trillion in 2021. However, to be specific, the UK’s economy was a bit higher at $3.19 trillion against India’s at $3.17 trillion during the year, showed the latest World Bank data.

India’s economy was just $13 billion behind the UK’s in 2021. India had also reduced the gap with the UK in 2019 to $50 billion from $200 billion a year earlier but the distance had widened to $90 billion in 2020.  Former chief statistician Pronab Sen said India’s economic recovery was much sharper in 2021-22 over the pre-Covid period than the UK’s in 2021 over 2019.

In national currency terms, the UK economy expanded to 2.32 trillion pounds in 2021, which was 2.6 per cent higher than the 2.26 trillion pounds in the pre-Covid period of 2019. On the other hand, India’s economy expanded by 17.8 per cent at Rs 236.44 trillion in 2021-22 against Rs 200.75 trillion in 2019-20.

When comparing figures in dollar terms, one has to keep in mind the movement of the exchange rate.
 

Sen said India’s currency depreciated marginally against the dollar in 2021-22 compared to 2020-21, while the pound depreciated much sharper against the greenback in 2021 against that in 2020.

It should be noted here while the dollar has more value than the rupee, it is the other way round in relation to the pound.

India’s currency depreciated by 0.55 per cent against the dollar while for the pound it was 6.5 per cent in this period.

ICRA Chief Economist Aditi Nayar said India’s GDP growth was likely to be one of the fastest globally during 2022-23, which should help India overtake the UK imminently.

India continued to race ahead of France, with which it was on a level with $2.65 trillion in 2017. The next year too, both the economies were tied at $2.7 trillion. Since then, India overtook France to occupy sixth spot in the world. The gap stood at $100 billion in 2019 but reduced to $40 billion the next year. The difference widened to $230 billion in 2021. Many would like to see the ranking of countries in terms of purchasing power parity (PPP), which takes into account the cost of living in a country while converting a currency into dollars.

In PPP terms, India continued to be the third-largest economy in the world in 2021-22. The economy stood at $10.22 trillion, which was almost twice as much as Japan’s  $5.4 trillion in 2021. Japan was the fourth-largest economy in the world in PPP terms in 2021.

The dollar value of a rupee is taken as 23.11 as of 2021-22 in PPP terms.