For the first time in over 100 years, Indian economy is larger than the UK’s.
The Indian economy achieved this milestone owing to rapid economic growth in the country for over 25 years as well as decline in the United kingdom (UK) following the Brexit vote.
At current exchange rates (December 16), UK’s 2016 GDP of GBP 1.87 trillion comes to $2.29 trillion, whereas India’s GDP of Rs 153 trillion converts to $2.30 trillion.
Earlier, it was expected that India will overtake UK’s GDP in 2020, but given the nearly 20 per cent decline in the value of the pound over the last 12 months, the feat was achieved in 2016.
The gap between the two GDPs is also expected to widen further as India is likely to grow at 6 to 8 per cent as against UK’s growth of 1 to 2 per cent per annum until 2020, and likely beyond. The figures also take into considerations the fluctuations in the currency.
The Economist Intelligence Unit (EIU), the research and analysis division of The Economist Group in its global economic outlook in December said that India continues to be the fastest-growing large economy beating China.
The group however slashed India’s economic growth forecast from 7.3 percent to 6.5 percent in 2016-17 because of cash shortage from “botched implementation of demonetisation”.
According to global rating agency S&P, the demonetisation move by the government will be beneficial for the Indian economy in the long run. At the same time it also expects the goods and services tax (GST) to adversely impact some sectors of the economy but will be beneficial in the long-term.
S&P believes demonetisation and GST could result in a wider tax base and greater participation in the formal economy.
The government sees demonetisation and digitisation exercise as a new normal in the Indian economy that would replace the “unacceptable” system prevalent over the last 70 years.
“The government took a somewhat courageous step and went in for large currency swap. The fact that India today has the capacity to take these decisions and capacity to enforce them, to experiment boldly even at a time when the world is looking more inwards, marks an exception as far as India is concerned,” Jaitley said.