India is now world’s fifth-biggest economy overtaking UK

India leaped past the UK to become the fifth-biggest economy in the final three months of 2021. The calculation is based in US dollars and according to GDP figures from the International Monetary Fund, India extended its lead in the first quarter.

The UK’s decline down the international rankings is an unwelcome backdrop for the new prime minister. The country is facing the fastest inflation in four decades and rising risks of a recession that the Bank of England says may last well into 2024.

Conservative Party members choose Boris Johnson’s successor on Monday, with Foreign Secretary Liz Truss expected to beat former Chancellor of the Exchequer Rishi Sunak in the run-off.

In contrast, the Indian economy is forecast to grow more than seven 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. According to the finance secretary, the Indian economy will grow over 7% in FY23.

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. The calculations were done using the IMF database and historic exchange rates on the Bloomberg terminal.

IMF’s own forecasts show India overtaking the UK in dollar terms on an annual basis this year, putting the Asian powerhouse behind just the US, China, Japan and Germany. A decade ago, India ranked 11th among the largest economies, while the UK was 5th.