India will soon overtake Britain to become world's fifth largest economy, a "Forbes" magazine report has said. Economist Rajiv Biswas talks to DW about the impending milestone and the overall state of India's economy.
DW: What do you have to say about the Forbes magazine report on the Indian economy? Shed some light on its symbolic achievement, and what does it mean for India as a country?
Rajiv Biswas: India is actually on the threshold of overtaking the UK as the world's fifth largest economy in the 2017-18 timeframe, measured in terms of total nominal GDP in US dollars. Whether the exact year in which this occurs is 2017 or 2018 will be dependent on real GDP growth rates and exchange rates. When India does achieve this level of GDP, it will be a very symbolic milestone for India as the size of its economy surpasses that of its former colonial master.
How has India achieved this status? What measures, do you think, have contributed to the economic growth?
A key factor in the convergence of India's total GDP to the UK GDP level is due to India's more rapid GDP growth rate. For example, in the current fiscal year, the Indian economy is forecast to grow at 6.9 percent while the UK economy is estimated to grow at 2.1 percent.
Nevertheless, on a per capita household income basis, India's average per capita GDP in 2017 is projected to be $1,766 (1,691 euros) while the UK's per capita GDP is estimated to reach $36,000. This highlights the very large gap in living standards and per capita GDP between India and the UK.
An important factor that has gradually improved India's economic performance has been the economic reforms and liberalization process that has occurred since 1999.
Does India's economy surpassing that of Britain also have something to do with the UK's Brexit woes?
Brexit has certainly had a substantial impact in terms of reducing the UK's total GDP in US dollar terms, since the British pound has depreciated significantly since the Brexit referendum. This has resulted in UK GDP actually declining in US dollar terms in 2016 compared to the previous year, even though the UK economy is estimated to have shown positive GDP growth in British pound terms.
India is now one of the leading world economies. Has this translated into alleviation of poverty and better living standards for Indians as well?
Although India is on the brink of becoming the world's fifth largest economy in terms of total GDP, it is still a relatively low-income economy with average per capita GDP of only $1,570 in 2015, comparable to the per capita GDP levels of Kenya or Ghana. India's per capita GDP compares poorly with other large Asian economies, at about half the GDP per person in Indonesia and one-fifth the per capita GDP of China. An estimated 270 million people, or 22 percent of the total Indian population, still live in poverty.
How do you analyze Indian Prime Minister Narendra Modi's economic policies? And what is your take on the current demonetization chaos?
While most of PM Modi's policies since he took office have been sound, including the Smart Cities project, the introduction of a GST tax and the "Make in India" policy to boost industrial development, the demonetization plan has been a complete fiasco. With the abrupt cancellation of 86 percent of the nation's banknotes in a cash-based society, the economy has ground to a halt and it may still take some more months for things to normalize. The GDP estimate for the October to December quarter will be badly impacted by the demonetization. It is also very unclear whether there will be any lasting impact on corruption and black money by the demonetization measures since alternative methods of accumulating assets can be used, such as foreign currency or gold.
Rajiv Biswas is Asia-Pacific Chief Economist at HIS Global Insight, a global information and analytics firm. He is the author of "Asian Megatrends" (Palgrave, 2016).
The interview was conducted by Shamil Shams.