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Britain has fallen behind India to become the world’s sixth-largest economy, dealing a further blow to the London government dealing with a brutal cost-of-living shock.
The former British colony overtook Britain in the final three months of 2021 to become the fifth-largest economy. India extended its lead in the first quarter, according to the IMF’s GDP figures, which are calculated on a dollar basis.
Britain’s slide in international rankings is an unwelcome backdrop for the new prime minister. Conservative Party members picked Boris Johnson’s successor on Monday, with Foreign Secretary Liz Truss expected to beat former Chancellor Rishi Sunak in the runoff.
The winner will take over a country facing the fastest inflation in 40 years and a rising risk of a recession that the Bank of England says could last until 2024.
In contrast, India’s economy is expected to grow by more than 7% this year. Indian stocks saw a world-class rally this quarter, lifting their weighting to the second-highest spot on the MSCI Emerging Markets Index, behind China.
On an adjusted basis and using the dollar exchange rate on the last day of the relevant quarter, India’s economy in “nominal” cash was $854.7 billion in the quarter ended March. Likewise, the UK is at $816 billion.
Calculations are done using the IMF database and historical exchange rates on the Bloomberg terminal.
The UK is likely to fall further since then. In cash terms, UK GDP grew by just 1% in the second quarter, shrinking by 0.1% when adjusted for inflation. The pound has also underperformed the dollar relative to the rupee, which has fallen 8% against the Indian currency this year.
The IMF’s own projections show that in dollar terms, India will overtake Britain this year, putting the Asian powerhouse behind the United States, China, Japan and Germany. A decade ago, India was 11th among the largest economies, while the UK was 5th.
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