The UK’s slip in global rankings provides an unfavorable background for the next prime minister.
As the government in London struggles to adjust to a harsh cost-of-living shock, Britain has fallen behind India to become the sixth largest economy in the world.
In the final three months of 2021, India outpaced the UK to become the fifth-largest economy. According to IMF GDP data, India increased its lead in the first quarter of the computation, which is based on US dollars.
For the next prime minister, the UK’s slip in global rankings is an unwanted background. Conservative Party members selected Liz Truss as 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.
The winning candidate would lead a country that is experiencing its highest rate of inflation in four decades, and growing chances of a recession that the Bank of England predicts may stretch well into 2024.
The Indian economy, on the other hand, is anticipated to expand by more than 7% this year. Indian equities have recently had a global-beating recovery, moving their weighting into second place in the MSCI Emerging Markets Index, only behind China’s.
The size of the Indian economy, on an adjusted basis and using the dollar exchange rate on the final day of the relevant quarter, was $854.7 billion from January through March. The UK was $816 billion on the same basis.
The IMF database was used for the computations and historical exchange rates on the Bloomberg terminal.
Since then, the UK has likely declined much more. In the second quarter, the UK’s GDP increased by just 1% in nominal terms and by 0.1% after accounting for inflation. With the pound losing 8% versus the rupee this year, sterling has underperformed the dollar relative to the Indian currency.
According to the IMF’s projections, India will surpass the UK in dollar terms annually this year, leaving the Asian giant only behind the US, China, Japan, and Germany. India was the 11th-largest economy ten years ago, while the UK was the fifth-largest.