India becomes the sixth largest economy in the world

India overtakes France and becomes the sixth largest economy

According to the latest World Bank data India has an estimated per capita income of USD 7,060 while France has USD 43,720 that is around six times more than that of India.

Even though France is the FIFA World Cup 2018 champion, India has outranked the country and has become the sixth largest economy of the world. According to the World Bank data, India’s Gross Domestic Product (GDP) amounted to USD 2.597 trillion, as against France’s USD 2.582 trillion. The country’s economy grew at a seven-quarter high of 7.7 pc in the three months ended March 2018, helped by higher government spending and investment.

But is it such a big deal? There are multiple challenges that the country has to overcome. India ranked 144, with per capita GDP of the USD 1,940, and that is just five percent of the per capita GDP of France. Even if you compare it with China, the per capita GDP is just one-fifth of China’s.

Where does India stand?

Even though India has outranked France, it is still behind the French in many aspects. According to the latest World Bank data India has an estimated per capita income of USD 7,060 while France has USD 43,720 that is around six times more than that of India. Also the country ranks at the 123th position when it comes to per capita income at purchasing power parity (PPP) while France ranks at the 25th position.

One might argue that the reason India has a much lower PPP compared with France is the difference in population (per capita is the total size of the economy divided by the total number of people in that country). India’s population is around 1.34 billion, whereas the population of France is 67 million. But that is not the case for China. The population of China is around 1.4 billion and it has a per capita income of USD 16,760 (ranked 77th in the world), that is almost double of India.

The employment scenario in India is also not stable. Informal sector is the major source of income for 80 pc of Indians. According to the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in India reached a 71-week high in the week ended February 25. The CMIE said that February 2018 will end with the highest unemployment rate in the past 15 or 16 months. The unemployment rate of China, UK, and Germany is three-four percent while France has close to a nine percent rate.

India faces a severe shortage of skilled labour force. According to a research conducted by the National Institute of Skill Development (NISD), nearly 300 million youth are currently under employed or unemployed and presently only 2 pc of the country’s total workforce has undergone skills training. Countries like the UK, the US and Japan have a skilled workforce of 68 pc, 52 pc and 80 pc respectively.

Also the manufacturing sector has not performed up to the mark. In fiscal year 2018, manufacturing as a percentage of GDP stood at 18.1 pc. When the Modi government started the ‘Make in India’ campaign, it aimed at increasing the share of manufacturing to GDP to 25 pc in the coming years. Even after four years not much progress has been made. There has also been a slowdown in private investment in the manufacturing sector.

According to an Oxfam survey released earlier this year, India’s richest one percent own 73 pc of wealth generated in India. The government needs to focus on increasing the income level of the people particularly the below poverty level group. Since India is expected to be the most populous country by 2024 surpassing China, the Indian policymakers will face a tough challenge in not only ensuring an inclusive growth but also making India grow at a faster rate.