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India beats UK in terms of GDP, sets eyes on 4th rank by 2027

The path taken by India since 2014 reveals that the country is likely to get the tag of 3rd largest economy in 2029, a movement of seven places upwards since 2014 when India was ranked 10th

India beats UK in terms of GDP, sets eyes on 4th rank by 2027
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Mumbai: India has undergone a large structural shift since 2014 and is now the fifth largest economy. Interestingly, India has surpassed UK as the fifth largest economy as early as December 2021. The share of India's GDP is now at 3.5 per cent, as against 2.6 per cent in 2014 and is likely to cross 4 per cent in 2027, the current share of Germany in global GDP.

The path taken by India since 2014 reveals that the country is likely to get the tag of third largest economy in 2029, a movement of seven places upwards since 2014 when India was ranked 10th. India should surpass Germany in 2027 and most likely Japan by 2029 at the current rate of growth. This is a remarkable achievement by any standards, says a report by SBI's internal economic research.

According to Soumya Kanti Ghosh, SBI group's chief economic advisor, "In coming days India is likely to be the beneficiary as China slows down in terms of new investment intentions. Global tech major Apple's recent decision to shift part production of its flagship iPhone 14 model for worldwide shipping from India, with a negligible time lag of a few weeks post its slated launch on September 7, bears testimony to such an optimism! The move by Apple, the most recognisable face of tech infused innovation in the last two centuries, that captures aspirations of an upwardly mobile population should open the flood gates for other major conglomerates to follow suit."

A broad-based growth of empowerment will also lift India's per capita income from current levels and this could also act as a force multiplier for a better tomorrow. At the beginning of 21st century, China embarked on an accelerated growth path occupying the second largest economy tag. Analysts believe, with right policy perspective and realignment in global geopolitics our current estimates might even undergo an upward revision!

The Indian economy grew by 13.5 per cent in Q1 with the services sector showing a strong rebound. The GVA grew by 12.7 per cent. Though GDP grew in double digits, but still it came way below the market expectations. The primary culprit was the growth in manufacturing sector which grew by a measly 4.8 per cent in Q1.

Analysts strongly believe that the estimation of manufacturing sector growth needs serious introspection in the sense that IIP is still indexed at 2012 base. The CPI basket has also not changed since 2012 and this has also possibly resulted in overstating CPI inflation at multiple times. Take the example of manufacturing exports. Till pre pandemic, the IIP and manufacturing exports have moved in close tandem, but they have completely diverged post pandemic. This is because, with India announcing a lot of incentives under the PLI scheme, there has been an exponential jump in manufacturing exports from India, like handset exports that are not a part of IIP basket, for example Foxconn.

Separately, the steel production by select companies has undergone locational shift, which are not a part of the IIP sample. Nokia's handset manufacturing facility at Chennai has closed down post 2014. There are many such examples. This has meant that the correlation between manufacturing exports and IIP growth post pandemic is weak. A logical corollary to all this is gross misappropriation (or underestimation) of manufacturing sector growth. Analysts believe that the new base of IIP (on which the Government is currently working) will remove these glitches to have a fair representation.

Kumud Das
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