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India has become the world's 5th largest economy, overtaking Britain and the unprecedented moment is hailed by several industrialists, business tycoons, and bankers. While it's indeed a great moment for every Indian, it is also important to understand that there are still miles to go. Ace banker Uday Kotak, the managing director of Kotak Mahindra Bank also hailed India for achieving such an impressive milestone but he also gave a reality check on the "population denominator". Kotak wrote, "Proud moment for India to pip UK, our colonial ruler, as the 5th largest economy: India $3.5 trillion vs the UK $3.2 trillion".
“But a reality check of population denominator: India: 1.4 billion vs UK.068 billion. Hence, per capita GDP we at $2,500 vs $47,000. We have miles to go…Let’s be at it!" added the veteran banker.
India has a population 20 times that of the UK and so its GDP per capita is lower.
This week, India overtook the UK to become the world's fifth-largest economy and is now behind only the US, China, Japan, and Germany, according to IMF projections.
A decade back, India was ranked 11th among the large economies while the UK was at the fifth position.
With record beating expansion in the April-June quarter, the Indian economy has now overtaken the UK, which has slipped to the sixth spot.
The assumption of India overtaking the UK is based on calculations by Bloomberg using the IMF database and historic exchange rates on its terminal.
"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 USD 854.7 billion. On the same basis, the UK was USD 816 billion," stated a Bloomberg report.
With India being the world's fastest-growing major economy, its lead over the UK will widen in the next few years.
Meanwhile, a note by economists at SBI stated that the Indian economy overtook the UK in December 2021 to be the fifth largest in the world.
"…(India) is now the 5th largest economy. Interestingly, India had surpassed the UK as the 5th largest economy as early as December 2021 itself and not recently as is being claimed," the note said.
In another latest report, SBI said India will surpass Germany in 2027 and most likely Japan by 2029 and become the 3rd largest economy at the current growth rate.
India's GDP expanded 13.5% in the April-June quarter, the quickest pace in a year, to retain the world's fastest growing economy tag but rising interest costs and the looming threat of a recession in major world economies could slow the momentum in the coming quarters.
The growth, though lower than the Reserve Bank of India (RBI) estimate of 16.2%, was fuelled by consumption and signalled a revival of domestic demand, particularly in the services sector.
Pent-up demand is driving consumption as consumers, after two years of pandemic restrictions, are stepping out and spending. The services sector has seen a strong bounce back that will get a boost from the festival season next month.
But the slowing growth of the manufacturing sector at 4.8% is an area of worry. Also, imports being higher than exports is a matter of concern.