UK slips behind India to become world's sixth biggest economy

India's economy is forecast to grow more than 7 per cent this year, while the UK is facing the fastest inflation in 40 years. PHOTO: BLOOMBERG

LONDON - Britain has dropped behind India to become the world’s sixth largest economy, delivering a further blow to the government in London as it grapples with a brutal cost-of-living shock. 

The former British colony bypassed the United Kingdom in the final three months of 2021 to become the fifth-biggest economy. 

The calculation is based on US dollars, and India extended its lead in the first quarter, according to gross domestic product figures from the International Monetary Fund (IMF). Britain’s decline down the international rankings is an unwelcome backdrop for its new prime minister. 

Conservative Party members will choose Mr Boris Johnson’s successor on Monday, with Foreign Secretary Liz Truss expected to beat former finance minister Rishi Sunak.

The winner will take over a nation facing the fastest inflation in four decades and rising risks of a recession that the Bank of England says may last well into 2024.

By contrast, the Indian economy is forecast to grow more than 7 per cent this year. A world-beating rebound in Indian stocks this quarter has just seen their weighting rise to the second spot in the MSCI Emerging Markets Index, trailing only China’s. 

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 US$854.7 billion (S$1.2 trillion). On the same basis, Britain was US$816 billion. 

The calculations were done using the IMF database and historic exchange rates on the Bloomberg terminal. Britain is likely to have fallen further since. 

Britain’s GDP grew just 1 per cent in cash terms in the second quarter and, after adjusting for inflation, shrank 0.1 per cent. 

Sterling has also underperformed the dollar relative to the Indian rupee, with the pound falling 8 per cent against the Indian currency this year. 

The IMF’s own forecasts show India overtaking Britain in dollar terms on an annual basis this year, putting the Asian powerhouse behind just the United States, China, Japan and Germany.

A decade ago, India ranked 11th among the largest economies, while Britain was fifth. BLOOMBERG

Join ST's Telegram channel and get the latest breaking news delivered to you.