Statsguru: India's journey to become 5th largest economy since 2000

At the turn of the century, the Indian economy was smaller than the US, Japan, Germany, the UK, France, China, Italy, Mexico, Canada, Brazil, South Korea and Spain. Fast forward to 2023-24, and India now trails only the US, China, Germany, and Japan.

 

India’s climb from being the 13th largest economy in 2000-01 to the 5th in 2023-24 is a remarkable feat (Chart 1). 

 

Union Finance Minister Nirmala Sitharaman has said that India can become the third-largest economy in the world by 2027. However, the International Monetary Fund (IMF), in its recent World Economic Outlook (WEO), projects this milestone might be reached a year later, in 2028-29 (Chart 2). 

 

According to the WEO data, India is also expected to become a $5 trillion economy a year before that (Chart 3). 

 

Many argue that the purchasing power parity (PPP) offers a better measure for comparing economies than using market exchange rates to convert their sizes into dollars. By this measure, India has already held the position of the world’s third-largest economy for a long time (Chart 4).

 

Over a decade ago, then finance minister Pranab Mukherjee, in response to a Budget debate, had said: “People are talking of GDP …what should we do with the GDP and can we eat GDP?” In this context, it is better to look at other economic aspects, such as per capita income.

 

Chart 5 illustrates that the country’s growing population is dampening the economic gains achieved over the years, despite the demographic dividend India is currently experiencing.

 

On PPP terms, India performs better, but only moderately (Chart 6).