India becomes 5th largest economy, pushing the UK to 6th place

By Al Mayadeen English
Source: Agencies
3 Sep 2022 11:21

The UK loses its fifth placement to India on the largest economies list, as the latter's economy is further anticipated to expand by more than 7% this year.

India becomes 5th largest economy and pushes the UK the 6th place

The UK has fallen behind India to become the world's sixth largest economy, dealing another blow to the government in London as it mitigates a devastating cost-of-living shock.

In the final three months of 2021, India overtook the UK to assume its place as the world's fifth-largest economy.

According to GDP data from the International Monetary Fund (IMF), which is based on US dollars, India increased its lead in the first quarter.

Unfavorable circumstances surround the next prime minister, including the UK's slide down international rankings.

On Monday, Conservative Party members will elect Boris Johnson's replacement and Foreign Secretary Liz Truss is predicted to prevail against former Chancellor of the Exchequer Rishi Sunak.

The winning candidate would lead a country that is experiencing its highest rate of inflation in four decades as well as 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. Following a world-beating rally in Indian equities this quarter, their position in the MSCI Emerging Markets Index has risen to second place, following only 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's was $816 billion on the same basis.

The computations were performed on the Bloomberg terminal using historic exchange rates and the IMF database.

Since then, the UK is likely to have dropped even further. In the second quarter, the UK's GDP increased by only 1% in nominal terms and by 0.1% after accounting for inflation. With the pound losing 8% against the rupee this year, the sterling has underperformed the dollar relative to the Indian currency.

According to the IMF's own projections, India will surpass the UK in dollar terms annually this year, leaving the Asian giant just behind the US, China, Japan, and Germany. India was the eleventh-largest economy ten years ago, while the UK was the fifth-largest.

Living expenses wreak havoc in the UK

It is worth noting that the collective West's decision to isolate Russia and sanction it without properly taking into account the consequences has driven them to face a difficult winter if no solutions unfold soon. While energy alone is not the cause for the decline in living standards in certain parts of the world while others advance, it remains at the heart of the ongoing global struggle.

The increasing energy crisis is wreaking havoc on British family budgets more than any other country in Western Europe, according to The Guardian, citing a research by the International Monetary Fund research.

The research also made note of the fact that compared to other countries in Europe, Britain has a far wider disparity in the cost burdens placed on low-income and rich families. This was ascribed to the UK's high reliance on gas to create energy and heat houses during a period of rising gas costs. The IMF also notes that the UK has the least energy-efficient housing in Western Europe.

According to the study, increasing energy costs will cause the typical UK household to lose 8.3% of its overall purchasing power in 2022. The percentage is anticipated to be 4% in Germany and Spain. In all of Europe, only Czech and Estonian households are more affected than UK households.

Energy costs are expected to account for 17.8% of household budgets for the lowest 10% of UK households this year, compared to just 6.1% for the wealthiest 10%. The IMF evaluated 25 European nations, and this divergence of 11.7% points is by far the biggest among them. The gap is 3.9% points in France and 2.5% points in the Netherlands.

Furthermore, in 2022, it is anticipated that the rising cost of other goods would reduce household budgets in Britain by another 2%.