Pandemic knocked India off course to 6th biggest economy in 2020

India has been knocked off the economy course somewhat through the impact of the coronavirus pandemic, says the Centre for Economics and Business Research (CEBR) in its annual report. As such, the United Kingdom overtook India again and will stay ahead till 2024.

India had overtaken the UK in 2019 to become the fifth largest economy in the world, but has been relegated to the 6^th position in 2020. The CEBR report attributed this to the weakness of the rupee. “Growth will naturally slow as India becomes more economically developed, with the annual GDP growth expected to sink to 5.8 per cent in 2035,” it said. “This growth trajectory will see India become the world’s third largest economy by 2030, overtaking the UK in 2025, Germany in 2027 and Japan in 2030.” The UK-based think tank also forecasted that the Indian economy will expand by nine per cent in 2021, and by seven per cent in 2022.

Japan would remain the world’s third-biggest economy, in dollar terms, until the early 2030s when it would be overtaken by India, pushing Germany down from fourth to fifth. The CEBR said India’s economy has been losing momentum even ahead of the shock delivered by the global health crisis. It added that the COVID-19 pandemic has been a human and an economic catastrophe for India, with more than 140,000 deaths recorded as of mid-December.

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An important driver of India’s economic recovery thus far has been the agricultural sector, which has been buoyed by a bountiful harvest. “In the medium to long term, reforms such as the 2016 demonetization and more recently, the controversial efforts to liberalize the agricultural sector can deliver economic benefits,” the CEBR observed. “However, with the majority of the Indian workforce employed in the agricultural sector, the reform process requires a delicate and gradual approach that balances the need for longer-term efficiency gains with teh need to support incomes in the short-term.”

The think tank said the pace of economic recovery will be inextricably linked to the development of the COVID-19 pandemic, both domestically and internationally. “As manufacturer of the majority of the world’s vaccines, and with a 42-year-old vaccination programme that targets 55 million people each year, India is better placed than many other developing countries to roll out the vaccines successfully and efficiently next year,” it said.