Britain has fallen behind India to become the world’s sixth largest economy, dealing another blow to the government in London as it deals with a severe cost-of-living shock.
In the final three months of 2021, India surpassed the United Kingdom to become the world’s fifth-largest economy. The computation is in US dollars, and India maintained its lead in the first quarter, according to International Monetary Fund GDP estimates.
The United Kingdom’s slip in international rankings is an unwanted background for the next prime leader. Boris Johnson’s replacement will be chosen by Conservative Party members on Monday, with Foreign Secretary Liz Truss poised to beat former Chancellor of the Exchequer Rishi Sunak in the run-off.
The winner would inherit a country experiencing the sharpest inflation in four decades and increased chances of a recession that the Bank of England predicts will extend until 2024.
In comparison, the Indian economy is expected to increase by more than 7% this year. Following a world-beating rally in Indian equities this quarter, their position in the MSCI Emerging Markets Index has risen to second place, following only China’s.
The Indian economy in “nominal” cash terms in the quarter through March was $854.7 billion on an adjusted basis and using the dollar exchange rate on the final day of the relevant quarter. On the same basis, the United Kingdom was worth $816 billion.
The computations were performed on the Bloomberg terminal using the IMF database and historical exchange rates.
Since then, the UK is likely to have fallen much worse. In the second quarter, the UK economy increased by just 1% in cash terms and shrank by 0.1% when adjusted for inflation. Sterling has similarly underperformed the dollar in relation to the rupee this year, losing 8% versus the Indian currency.
According to the IMF, India will overtake the United Kingdom in dollar terms this year, putting the Asian giant behind only the United States, China, Japan, and Germany. A decade ago, India was rated 11th among the world’s top economies, while the United Kingdom was placed fifth.