The Indian Economy – Growing Bigger and Faster

Indian Economy – THE FIFTH LARGEST IN THE WORLD

On 2^nd September 2022, in an interview with the Economic Times, Mr. Bob Sternfels, CEO, McKinsey and Co. said that India will become the world’s talent factory as it will have 20 per cent of the world’s working population by 2047. He also added that this is not only India’s decade, but India’s century as it has most of the necessary key elements for a successful and growing economy. And, almost at the same time, we were informed that India has overtaken the UK to become the fifth largest economy in the world.

Bloomberg has come out with a report stating that India has overtaken the United Kingdom (UK) to become the fifth largest economy in the world, displacing the UK to 6^th place. Bloomberg has cited the IMF database on GDP figures to support their claim. According to the Bloomberg report, the size of the Indian economy with regards to ‘nominal’ cash was $854.7 billion during the quarter ending March 2022 on an adjusted basis and using the dollar exchange rate on the last day of the relevant quarter. In contrast, the UK was at $814 billion. The calculations were done using the IMF database and historic exchange rates on the Bloomberg terminal.

This is indeed a great step forward for India. Only the USA, China, Japan and Germany stand ahead of India. Only 10 years ago, India was ranked the 11^th largest economy in the world. The pace with which India has grown in the last decade has been tremendous and has led to the country becoming an economic powerhouse. India’s GDP is currently estimated at USD 3.21. Also, India is likely to be the fastest-growing large economy, with an estimated growth of 7.2 per cent as per the Reserve Bank of India’s forecast for the current financial year.

The good news for the Indian economy continues. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) stood at 56.2 in the month of August 2022. This is the second strongest improvement for the index in the last nine months. According to the survey, India’s manufacturing sector strengthened due to increasing demand and lowering of inflation rates. And this was supported by a pick-up in exports and positive projections for the coming year.

To be sure, India will grow and outperform many other large and emerging economies. At the same time, we need to be aware of the pitfalls of inequitable growth. The figures relating to the Indian economy do not necessarily reflect the development needs of India. Focusing only on growth and not concentrating on the issues related to infrastructure and poverty can lead to serious problems, inequality, social unrest, and a slowing down of the economy. The gap between the rich and the poor is still staggeringly high and our per capita income is still very low compared to most developing and developed countries.

If India is to truly become an economic giant, it needs to work on becoming a more equitable and development-oriented economy and not just focus on GDP figures.

About the Author

VIJAY KUMAR VADDADI, India Entry & International Affairs Mr. Vijay Kumar is an Industrial Economist with 35+ years of experience in Economic Analysis, Trade & Investment Promotion, International Business Strategy & Cross-Cultural Impact.  A Post-Graduate in Economics with specialization in Industrial Economics and Economics of Transportation, Public Utilities & Social Infrastructure from the University of Bombay (1982). In 1984, he joined the Consulate General of the Netherlands in Mumbai as Economic & Commercial Officer and continued his association with the Netherlands Government (NBSO) for over 30 years. At SAS Partners, he heads the Trade and Investment Promotion activities, supports in organising programmes for international business delegations, curating knowledge reports, market studies and also helps our international clients in understanding the Indian business landscape better.