IMF released figures in September 2022 showing that India overtook the U.K. to become the fifth-largest economy in the world in the last quarter of 2021. It is now only behind the U.S., China, Japan and Germany. But the sweet pleasure of overtaking the U.K. has no comparable feeling for Indians. India’s GDP is $3.5 trillion vs. the U.K.’s $3.2 trillion.
— WealthDesk (@WealthDesk) September 12, 2022
The former colonial power ruled India for almost 90 years (1857 – 1947). Research by the renowned Indian economist Utsa Patnaik – published in 2018, drawing on nearly two centuries of detailed data on tax and trade, calculated that roughly 200 years, during the period 1765 to 1938, the East India Company and the British Raj siphoned a total of nearly $45 trillion from India. Between 1900-1945, India’s growth in per capita income was negligible, from Rs. 196 to 200.
Coming back to the present, it was less than a decade back when India was ranked 11th among the large economies while the U.K. was still in the fifth position. India being the world’s fastest-growing major economy, its lead over the U.K. will widen even further in the next few years. Analysts predict by 2030; it will be the world’s third-largest economy. India has over 166 billionaires. Gautam Adani has recently been declared the world’s third richest man, with $137 billion in wealth coming after Jeff Bezos (Amazon) and Elon Musk (Tesla). However, India has a huge population; it is close to overtaking China as the world’s most populated country, currently around 1.417 billion people. The reality is that while India has overtaken the U.K. in terms of the size of its economy, regarding per capita income, which measures how much money is made per person in a country, India is ranked 122 out of 190 countries. In per capita GDP terms, it stands at $2,500 vs. $47,000 for the U.K.
The news of India overtaking the U.K. came at a time when the U.K. was in the midst of the Conservative Party leadership run-off in which Rishi Sunak, the Indian origin former Chancellor of the Exchequer, was contesting against Liz Truss, the former Foreign Secretary to become Conservative Party leader and thus Prime Minister of the U.K.
Liz Truss may come to find she won a pyrrhic victory. The U.K. economy is in terrible shape; over the last couple of years, it has been hit first by Brexit, COVID-19, and now the consequences of the Russia-Ukraine war. The nation is facing its fastest-growing inflation in four decades and rising risks of a recession that the Bank of England says may last well into 2024. As winter looms, higher energy costs are around the corner, which is expected to push an additional 3 million people into poverty. Recently, the Resolution Foundation think tank stated that the impact of higher energy costs would wipe 5 percent off household spending power this year and a further 6 percent the following year – together, this would make it the sharpest decline in living standards in at least a century. The pound has been steadily declining, currently trading around $1.15 against the dollar, but it looks like it has further to fall. Liz Truss may find her name in the history books as the PM in power that saw the sterling at parity with the U.S. currency.
Note: A slightly different version of this article appears in the 2022 September Magazine.