After pipping France this year, India is all set to overtake the United Kingdom in 2019 to emerge as the world’s fifth largest economy, according to a study. Global firm PwC said that its annual analysis of global trends showed that India’s elevation to fifth place was likely to be permanent as the country of 1.3 billion people maintains a growth rate of 7.6% over the next five to six years. Notably, in the last four years, since the election of Narendra Modi to power in 2014, India has beaten four big economies to secure its position as the world’s sixth largest economy, piping France this year, the World Bank said in a recent report. We take a look at three key things to know.
Population, demographics in India’s favour
According to PwC favourable demographics such as as a high population and a catching up on per capita GDP will benefit the country. “India is the fastest growing large economy in the world, with an enormous population, favourable demographics and high catch-up potential due to low initial GDP per head. It is all but certain to continue to rise in the global GDP league table in the coming decades,” Mike Jakeman, a senior economist at PwC, said. Interestingly, since 2014, with a consistent GDP 7% plus growth, India has overtaken France, Brazil, Italy, and Russia. Between 2011 and 2014, India remained at the 10th rank for four continuous years.
Brexit impact, Pound plunge among UK’s woes
PWC noted that a fall in the value of the pound, combined with slower growth this year and next as Brexit takes its toll, will imply that the UK drops from fifth position in the GDP rankings to sit just above Italy in eighth place and Brazil in ninth. “The UK and France have regularly alternated in having the larger economy, but subdued growth in the UK in 2018 and again in 2019 is likely to tip the balance in France’s favour. The relative strength of the euro against the pound is an important factor here,” Jakeman noted.
Global economy to slow down in 2019
According to the firm, the global economy as a whole is expected to slow in 2019, with the pick up in growth of most major economies seen between the end of 2016 and the beginning of 2018 now over. Germany, Italy and Spain will suffer a long-term slowdown in GDP growth along with the three largest economies – the US, China and Japan – which the report said was largely in response to their ageing populations. In case of the US, the boost from fiscal stimulus is expected to fade and higher interest rates are likely to dampen consumer spending and a strong dollar will continue to drag on net exports. PwC projects US growth will moderate from an estimated 2.8 per cent in 2018 to around 2.3 per cent in 2019.