Indian Economy becomes 6th largest in the World - Salient Aspects Explained

Growing Indian Economy surpassing France

 India Enters Top Six

India has become the world's sixth-biggest economy, pushing France into seventh place, according to latest World Bank figures for 2017. India's gross domestic product (GDP) amounted to $2.597 trillion at the end of last year, compared to $2.582 trillion for France. However, ten years ago, India's GDP was half of France's. The US is the world's top economy, followed by China, Japan, Germany and Britain.

 Basis of Calculation

 This calculation is based on the relative GDP of two countries. GDP is the final value of the goods and services produced within the geographic boundaries of a country during a specified period of time, normally a year. GDP growth rate is an important indicator of the economic performance of a country. 

 The Reality

 While India has displaced France in GDP ranking, the story is completely different when it comes to per capita GDP. Due to humongous population, India loses out to France which has 20 times higher per capita GDP. This is because of the huge size of India's population, which is estimated to be around 134 crores against only 6.7 crore of France. Not just France, India is poorest of all nine other largest economies in per capita terms.

 Other Aspects

 According to the World Bank, Indian economy has benefitted from robust performances in manufacturing sector driven by increased consumer spending. The World Bank also noted that demonetisation in November 2016 and chaotic implementation of GST (goods and services tax) rollout in July last year were to be blamed for extended slowdown of Indian economy.

 Overall, India has made rapid progress in economy doubling its GDP in less than past 10 years and emerged as the engine of economic growth in Asia at a time when Chinese economy has shown definite signs of lethargy.

 Highlights of Indian Economy

  1. India has one of the fastest growing service sectors in the world with an annual growth rate above 9% since 2001, which contributed to 57% of GDP in 2012–13.
  2. India has become a major exporter of IT services, Business Process Outsourcing (BPO) services, and software services with $154 billion revenue in FY 2017. This is the fastest-growing part of the economy. The IT industry continues to be the largest private-sector employer in India.
  3. India is the third-largest start-up hub in the world with over 3,100 technology start-ups in 2014–15. The agricultural sector is the largest employer in India's economy but contributes to a declining share of its GDP (17% in 2013–14). India ranks second worldwide in farm output.
  4. The industry (manufacturing) sector has held a steady share of its economic contribution (26% of GDP in 2013–14).
  5. The Indian automobile industry is one of the largest in the world with an annual production of 21.48 million vehicles (mostly two and three-wheelers) in 2013–14.
  6. India had $600 billion worth of retail market in 2015 and one of world's fastest growing e-commerce markets.

Future Prospects

The long-term growth prospective of the Indian economy is positive due to its young population, corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy India topped the World Bank's growth outlook for the first time in fiscal year 2015–16, during which the economy grew 7.6%. Despite previous reforms, economic growth is still significantly slowed by bureaucracy, poor infrastructure, and inflexible labor laws (especially the inability to lay off workers in a business slowdown).

 The International Monetary Fund (IMF) has predicted India to grow at 7.4 per cent in 2018 and 7.8 per cent in 2019. The IMF, on the other hand, predicted that world's economy would grow at 3.9 per cent over the next year.