India will surpass the United Kingdom as the world’s fifth biggest economy by the end of this year, according to junior home minister Kiren Rijiju. India now just lags behind four other nations in terms of Gross Domestic Product (GDP), the US, China, Japan and Germany.
India’s total economic activity is 2016 was $2.30 trillion, compared to Britain’s $2.29 trillion, according to Forbes Magazine. The economic gap is expected to widen as India would continue to grow at a much faster rate than Britain, which has been struggling at 1 per cent growth compared to India’s 6 to 8 per cent.
The numerical achievement is being seen as vindication of India’s embrace of free market policies, rolled out full steam ahead by last Prime Minister Manmohan Singh in 1991.
India overtakes UK & becomes 5th largest GDP after USA, China, Japan & Germany. India may have large population base but this is a big leap. pic.twitter.com/ANPUExHEyL
— Kiren Rijiju (@KirenRijiju) December 18, 2016
India in 2015 also became the world’s fastest growing major economy. At 7.5 per cent, India’s growth rate outpaced that of China’s, which grew at 6.9 per cent during the same period.
However, improving on Britain’s GDP numbers holds much greater emotional connotations for India.
Why is it an important achievement for India
- India’s overtaking of the United Kingdom in GDP terms is of huge emotive signifance for the South Asian nation, which, at Independence in 1947, was left financially drained and emotionally scarred by policies of British colonial administration.
- However, there is still a long way to go before India achieves its pre-colonial supremacy in the world economy. The last time India’s GDP was more than that of Britain was some time in the nineteenth century. In fact, India’s contribution to the world’s GDP stood at 16 per cent in 1820, around when the Industrial Revolution was happening in England. According to a 2014 estimate, India’s GDP made up 6.83 per cent of the world’s total.
India may have larger population than England but this historic achievement generates emotional satisfaction due to historical background. http://t.co/pAYQ0uYjYt
— Kiren Rijiju (@KirenRijiju) December 18, 2016
- The steady decline in India’s economy coincided with colonisation of the subcontinent and introduction of advanced manufacturing technology in the UK. The political consensus across party lines in India holds colonial Britain responsible for India’s poverty. In order to make up for its past injustices, Britain has been providing India with development aid since 1947. London has reportedly sent 283 million GBP in direct and indirect aid to India since 2011. However, the recent report of India’s economy surpassing that of the UK has prompted fresh calls from politicians in England to scrap aid to India altogether.
- India, however, still lags behind its former colonial master in per capita income, a more truer indicator of prosperity in a society. While India’s per capita income has risen steadily since 1991 when New Delhi started pursuing free market policies, it’s way behind that of Britain. Compared to UK’s $38,160, India’s per capita income was nearly $1500 in 2013, as per World Bank.
Who takes the credit for this feat?
- While the Narendra Modi government has seemingly pursued more growth-oriented policies than its predecessor Congress-led administration since storming into power in 2014, it is former Indian Prime Minister Manmohan Singh who is largely credited with putting India on a path to economic prosperity. The South Asian giant has grown steadily at an almost 7 per cent average since 1991, compared to a rather sluggish average growth of around 1 per cent at which UK’s economy has expanded during the same period.
Matter of great pride as under dexterous leadership of PM @narendramodi, India has become 5th largest economy of the world surpassing UK.
— ShivrajSingh Chouhan (@ChouhanShivraj) December 21, 2016
- The Brexit vote has also played significant part in speeding up what had been a foregone conclusion. The contentious vote by Britons to leave the European single market earlier this year was followed by a sharp drop in the value of pound, which has reportedly slumped by 20 percent over the last 12 months. India was set to overtake the UK by 2020 according to an earlier prediction.
Didn’t demonetisation affect India’s economy?
- The decision to abolish 500 and 1000-rupee notes is taking its toll on the Indian economy, and the growth data for the next quarter may well reflect the scale of the hit taken. According to a prediction by HSBC bank, economic growth in India would slow by 1 per cent in the wake of demonetisation. However, it is highly improbable that it would be back to square one for India as Britain faces its own challenges following the Brexit vote.