India surpassed Britain on Saturday to become the world’s fifth largest economy.
According to GDP figures from the International Monetary Fund (IMF), the UK’s economy dropped behind India in its first quarter. A decade ago, India ranked 11th among the largest economies, while the UK was 5th.
The change in the rankings comes at a time when the UK is soon to get its new Prime Minister. The slip in the UK’s ranking is reportedly due to the soaring cost of living in the country.
Last month, the country witnessed double-digit consumer price inflation (10.1%) for the first time since 1982. The drop in rank sets off to further intensify the challenges for the successor of former Prime Minister Boris Johnson.
Reportedly, Foreign Secretary Liz Truss is likely to beat former Chancellor of the Exchequer Rishi Sunak in the Prime Ministerial race.
The new prime minister will have to address the most pressing situation in the UK, which faces rising risks of a recession. According to the Bank of England, the risks of a recession may last up until 2024.
On the other hand, the Indian economy is expected to grow by more than 7% this year. Indian stocks sharply rebounded to secure the second spot in Morgan Stanley Capital International’s (MSCI) emerging markets index, second only to China.
The IMF’s own forecasts suggest that India could potentially surpass the UK in dollar terms on an annual basis in 2022. This would put India behind just the US, China, Japan and Germany.
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, reported Bloomberg.
The UK’s GDP reportedly grew by 1% in cash terms in its second quarter, which dwindled further to 0.1% after adjusting the inflation. The pound foundered compared to the Indian rupee, falling 8% against the Indian currency in 2022.