As per the news agency Bloomberg’s calculations using IMF database and historical exchange rates, the size of the Indian economy in ‘nominal’ cash terms at the end of March 2022 quarter was US$854.7bn vs US$816bn for the UK economy. By this standard, India was the 5th largest economy of the world as on 31 March 2022, behind the USA, China, Japan and Germany.
This apparently innocuous, and mostly inconsequential, statistical data point has been subject of an intense discussion in India media – both mainstream and social.
The pro establishment groups have celebrated this data point as an important milestone in the resurrection of the Indian economy, especially under the stewardship of Prime Minister Narendra Modi. They have forcefully argued that the Indian economy surpassing the UK’s economy highlights the rising status of India in the global economy; and symbolizes the undoing of 200years of British slavery.
The groups opposing the establishment claims highlighted that the absolute number of GDP is meaningless. On the relevant parameters like per capita GDP, human development index, extreme poverty & hunger, etc., India lags far behind the UK. They argue that in fact, the position of India in most of these parameters has slipped lower in the past few years.
I see merit in both the arguments. The Indian economy growing despite all adversities and limitations over the past 75years ought to be a matter of pride for all the citizens. We are entitled to celebrate the achievements of our farmers, professionals, and entrepreneurs. At the same time it is also true that the pace and direction of growth is not adequate; and there is a scope to do much better. We need to address the quality and sustainability of the growth. The rising regional, social and individual disparities; inadequacies of growth in terms of human development and quality of life; and poor employment intensity of growth ought to be a matter of concern for the policy makers as well citizens.
Insofar as the statistics is concerned, in my view, the more appropriate benchmark would be China. Both Indi and China embarked on the journey of rebuilding the nation in late 1940s. In fact China started two years after us in 1949 when the civil war ended. Both started the process of accelerated economic reforms in the early 1990s. At that time both the countries had similar GDP and other economic conditions. Both the countries have similar demographics. However, the Chinese economy is now six times bigger than us.
One could argue that India and China are incomparable because of the vastly different political structure in these two countries. China has an authoritative regime and a significantly less transparent governance structure; whereas India is a reputable democracy with a more transparent and accountable governance structure. This is a fair point but certainly not incontestable.
The economy of the UK has been stagnating for over a decade now. The current GDP is almost the same as it was in 2014. The demographics have been worsening. Brexit has further slowed down the growth. It was a natural trend that India will surpass a stagnating UK, like it did with Italy, Australia and Canada in the past one decade, in due course. It may be a cause of celebration due to our colonial past, but there is little to celebrate in real economic terms.
It may be pertinent to note that the UK economy has been stagnating for almost a decade now. The latest GDP of the UK is almost similar to what it was in 2014. Brexit has also impacted the UK growth adversely. On the other hand, the GDP of India has been consistently growing, albeit at a much lower rate that what all of us would desire. India’s GDP would have overtaken the UK in 2017, if demonetarization had not slowed the pace of growth of India’s GDP. In the past one decade India’s GDP has overtaken the GDP of countries like Italy, Canada and Australia. It has meant little for India and Indians. The queue of Indians seeking to migrate to these countries has only become longer in this period.
At the current pace, it will take at least two decades for India to become a middle income country (per capita GDP at US$12000 from the present US$1961). Becoming a developed country like the UK, Canada and Australia will take much longer.
Celebrating every milestone in the journey is good; provided we do not lose sight of the destination. Celebrations that distract us from our goals are best avoided.
