As per World Population Review, India has emerged as the 5th largest economy in 2019
As per a report by the United States (U.S.) based think tank – World Population Review, India has emerged as the 5th largest economy in 2019, overtaking United Kingdom (U.K.) and France.
The report pegged the size of Indian economy at U.S. $ 2.94 trillion. The U.K. economy stood at U.S. $ 2.83 trillion and France at U.S. $ 2.71 trillion. It is to be noted that World Population Review is an independent organisation without any political affiliations.
The major factor for the rise of Indian economy is the fact that India is changing into an open-market economy from its previous autarkic (self-sufficient) policies.
The report states, “India’s economy is the fifth largest in the world with a GDP of $2.94 trillion, overtaking the UK and France in 2019 to take the fifth spot.”
In terms of Purchasing Power Parity (PPP), India’s Gross Domestic Product (GDP) is U.S. $ 10.51 trillion, exceeding that of Japan and Germany. Considering India’s large population, its per capita GDP is U.S. $ 2,170. However, India’s real GDP growth is expected to weaken for a 3rd straight year from 7.5% to 5%.
The report observed that opening-up of Indian economy in 1990s, industrial deregulation, reduced control on foreign trade and investment, and privatisation of state-owned enterprises have led to the rise of Indian economy. The service sector in India is the fastest growing sector in the world accounting for 60% of the economy and 28% of the employment. Besides, agriculture and manufacturing remain 2 of the most significant and contributing sectors of the Indian economy.
Separately, in its February update of Global Macro Outlook, the ratings agency Moody’s on Monday, i.e., February 17, 2020, slashed its 2020 growth projection for India from 6.6.% to 5.4%. It also cautioned that the global economy will also get affected due to the outbreak of the deadly Coronavirus (COVID-19). Moody’s also downgraded GDP growth forecast for China to 5.2% in 2020.
Talking about global economy, Moody’s said, “We have revised our global GDP growth forecast down, and we now expect G-20 economies to collectively grow 2.4% in 2020, a softer rate than last year, followed by a pick-up to 2.8% in 2021.”
The Moody’s further gave a forecast of 5.8% growth for India in 2021 as compared to its earlier estimate of 6.7%. It said that India’s growth has slowed down to a large extent, especially in the last 2 years. For the 3rd quarter of October-December 2019-20, India’s real GDP grew at 4.5%.
The report read, “Among emerging market countries, we have materially revised downward our growth forecasts for India, Mexico and South Africa. In all four cases, the revisions reflect wholly domestic challenges, rather than external factors.”
Moody’s is also expecting an additional rate cut by the Reserve Bank of India (RBI). But if the Corresponding Provisional Inflation (CPI) in India rises, due to higher food prices, it may become very difficult for RBI to cut the rates further.
Besides, banks and Non-Banking Financial Companies (NBFCs) have also been cautious in terms of lending. “Banks have been both unwilling to lend and to lower lending rates despite successive interest rate cuts by the central bank,” said Moody’s report.
It further added, “With a weak economy and depressed credit growth reinforcing each other, it is difficult to envision a quick turnaround of either, even if economic deceleration may have troughed.”
The revival of domestic demand, both rural and urban, and resumption of credit growth are important for driving growth. However, the recently presented Union Budget by the Finance Minister of India – Nirmala Sitharaman didn’t address the demand slump.
As compared to Moddy’s, the S&P Global, a U.S. based financial services company, has pegged the growth of Indian economy at a slightly higher rate. According to the data by S&P Global, India will grow at 6% in 2020 and 7% in 2021.
However, the Economic Survey of India, the flagship annual document of the Ministry of Finance, Government of India has said that Indian economy will witness 6-6.5% rise in the GDP in the next fiscal.
