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India becomes fifth largest Economy of world

  • Published
    3rd Sep, 2022
Context

India has leaped past the United Kingdom to become the fifth-largest economy in the world.

About
  • India leaped past the UK in the final three months of 2021 to become the fifth-biggest economy.
  • According to GDP figures from the International Monetary Fund, the calculation is based in US dollars, and India extended its lead in the first quarter.
  • The Indian economy is forecast to grow more than 7% this year. A world-beating rebound in Indian stocks this quarter has just seen their weighting rise to the second spot in the MSCI Emerging Markets Index, trailing only China's. 
  • On an adjusted basis and using the dollar exchange rate on the last day of the relevant quarter, the size of the Indian economy in "nominal" cash terms in the quarter through March was $854.7 billion. On the same basis, UK was $816 billion.
  • With the new development, India is only behind the US, China, Japan, and Germany, which as ranked as the largest, second-largest, third-largest, and fourth-largest economies in the world. 
  • The report comes two days after government data showed that India’s gross domestic product (GDP) rose 13.5 per cent in the June 2022 quarter (Q1FY23) as compared with the 20.1 per cent growth registered in Q1 2021-22.
  • According to the latest data released by the National Statistical Office (NSO), during April-June 2022, the country’s gross value added (GVA), which is GDP minus net product taxes and reflects growth in supply, grew 12.7 per cent.

Economic Growth:

  • Gross domestic product (GDP) is an estimate of the total value of finished goods and services produced within a country’s borders during a specified period, usually a year.
  • GDP is popularly used to estimate the size of a country’s economy.
  • GDP is most commonly measured by using the expenditure method, which calculates GDP by adding up spending on new consumer goods, new investment spending, government spending, and the value of net exports (exports minus imports).

Measuring GDP: Several popular ways to measure GDP, all of which are drawn from the World Bank database are described below:

  • Nominal GDP in Current U.S. Dollars: This is the most basic and common way of measuring and comparing GDP among countries, using local prices and currencies converted into U.S. dollars by using currency market exchange rates. This is the number that was used to determine the countries’ rankings in the top 25 list.
  • Purchasing Power Parity (PPP) Adjusted GDP in Current International Dollars: This is an alternative way of comparing nominal GDP among countries, adjusting currencies based on what basket of goods they could buy in those countries rather than currency exchange rates. This is a way to adjust for the difference in the cost of living among countries.
  • GDP Growth: This is the annual percentage growth rate of nominal GDP in local prices and currencies, which estimates how fast a country’s economy is growing.
  • GDP Per Capita, in Current U.S. Dollars: This is nominal GDP divided by the number of people in a country. GDP per capita measures how much a country’s economy produces per person, rather than in total. This can also act as a very rough measure of income or standard of living for individuals living in a country.
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