India likely to surpass UK in world's largest economy rankings: PwC

India is likely to surpass the United Kingdom in the world's largest economy rankings in 2019, as per a report by global consultancy firm PwC.

As per PwC's Global Economy Watch report, while the UK and France have regularly switched places owing to similar levels of development and equal populations, India's climb up the rankings is likely to be permanent.

Key Highlights

The PwC report has projected real GDP growth of 1.6 per cent for the UK, 1.7 per cent for France and 7.6 per cent for India in 2019.

According to the projected real GDP growth rate, India and France are likely to surpass the UK in the world's largest economy rankings in 2019, pushing it down from fifth to seventh place in the global table.

As per the World Bank data, in 2017, India became the sixth largest economy with a GDP of $2.59 trillion, surpassing France and pushing it to the seventh position. The GDP of France stood at $2.58 trillion.

The data further showed that the UK, which is currently dealing with its Brexit situation, had a GDP of $2.62 trillion, which is about $25 billion more than that of India.

PwC's Global Economy Watch

It is a short publication that looks at the trends and issues affecting the global economy and details its latest projections for the world's leading economies.

The report’s projection for India

According to the report, India should return to a healthy growth rate of 7.6 per cent in 2019-20, if there are no major headwinds in the global economy such as enhanced trade tensions or supply-side shocks in oil.

The growth will be supported through further realisation of efficiency gains from the newly adopted GST and policy impetus expected in the first year of a new government.

According to Mike Jakeman, a senior economist at PwC, 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.

The report’s projection for the world

1. Slow down in global growth: According to the report, the phase when the global economy enjoyed a mini-boom between the end of 2016 and early 2018 and growth picked up in most major economies, is now over.

In 2019, the global economy as a whole is expected to slow down as G7 countries return to growth rates close to their long-run averages.

Growth in China is also expected to slow relative to 2018. Although the government will try to ensure that the slowdown is minimal, the impact of US tariffs and the need to control debt levels are likely to result in at least a modest deceleration in growth in 2019.

2. Workers and wages to come to the fore: Labour markets in advanced economies are likely to continue to tighten, even if job creation slows.

This may push up wages, but cause problems for businesses looking to fill talent shortages. In 2019, unemployment rates are expected to fall a little further in the US and Germany, where the rates of job creation have remained strong.

Assuming an orderly Brexit, by end-2019, the UK may also see unemployment flattening off at around current levels, though a disorderly ‘no deal’ could lead to a marked rise in unemployment.

3. Trade conflicts to deepen:The report predicts trade wars to continue in 2019. It is likely to generate further uncertainty for policymakers and businesses.

While the policymakers will try to assess the impact of potential tariffs on growth and inflation, the businesses will attempt to mitigate the impact on their supply chains and customers.

The main focus of tensions will most likely be on the US-China trade, but there will always be the risk of this escalating into a wider trade conflict and businesses accordingly need to plan for different scenarios.

Background

The US was the world's largest economy with a size of $19.39 trillion, followed by China ($12.23 trillion) at the second place in 2017.

Japan ($4.87 trillion) and Germany ($3.67 trillion) were at the third and fourth places, respectively.

The UK and France have regularly alternated between the fifth and sixth positions, but subdued growth in the UK in 2018 and again in 2019 is likely to tip the balance in India and France's favour and push the nation to the 7th position.

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