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 calculation is in US dollars, and India maintained its lead in the first quarter, according to International Monetary Fund GDP figures.
The United Kingdom’s drop in international rankings is an unwelcome backdrop for the new prime minister. Boris Johnson’s successor will be chosen by Conservative Party members on Monday, with Foreign Secretary Liz Truss expected to beat former Chancellor of the Exchequer Rishi Sunak in the run-off.
The winner will inherit a country facing the fastest inflation in four decades and rising risks of a recession that the Bank of England predicts will last until 2024.
In comparison, the Indian economy is expected to grow by more than 7% this year. Following a world-beating rebound in Indian stocks this quarter, their weighting in the MSCI Emerging Markets Index has risen to second place, trailing 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 last day of the relevant quarter. On the same basis, the United Kingdom was worth $816 billion.
The calculations were performed on the Bloomberg terminal using the IMF database and historical exchange rates.
Since then, the UK is likely to have fallen even further. In the second quarter, the UK economy grew by just 1% in cash terms and shrank by 0.1% after adjusting for inflation. Sterling has also underperformed the dollar in relation to the rupee this year, falling 8% against the Indian currency.
According to the IMF, India will overtake the United Kingdom in dollar terms this year, putting the Asian powerhouse behind only the United States, China, Japan, and Germany. A decade ago, India was ranked 11th among the world’s largest economies, while the United Kingdom was ranked 5th.