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India Overtakes France To Become The World's 6th Largest Economy

IndianMoney.com Research Team | Updated On Tuesday, July 24,2018, 05:58 PM

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India Overtakes France To Become The World's 6th Largest Economy

 

 

India beats FIFA 2018 World Champions France. This just cannot be possible and you are definitely right. This is possible and has just happened, but not on the football field. India’s Gross Domestic Product popularly called GDP, is now the World’s sixth largest, overtaking that of France, the Football World Champions.

But is this a great achievement? Is India greater than the European Power, France? Let’s first understand what GDP is. Gross Domestic Product or GDP is one of the primary indicators used to gauge the health of a Country’s economy.

Investors, economists, businessmen, bankers, politicians and the media keep a close watch on GDP. It’s a single number that gives the total monetary value of all goods and services produced within India’s boundaries at a specific period of time.

Now, India’s $2.6 Trillion economy has gone past France’s $2.58 Trillion Economy. Does this mean India is greater than France? Want to know more on Investment Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

 

India Overtakes France To Become The World's 6th Largest Economy

 

India’s population is around 1,325 Million, while France’s population is around 67 Million. So, India has many more people than France. India has nearly 20 times more citizens than France.

Now let’s talk football language. A football team has 11 players. The news headlines must be 220-man India squeeze past 11-man France. This is because India has a population nearly 20 times that of France.

Comparing India’s GDP to France is like comparing Apples with Oranges. Let’s take a more realistic term, PPP or Purchasing Power Parity. PPP is all about the real purchasing power of the Rupee in India. Let’s assume 1 US Dollar is Rs 69. 1 US Dollar will purchase fewer commodities in the US, compared to what Rs 69 can purchase in India.

Let’s compare the true value of the rupee vis-à-vis Dollar using the Purchasing Power Parity. If you compare PPP, India’s current GDP is around $9.45 Trillion with a global rank of 3, just behind US and China. Does this make India an economic superpower?

 

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1. Compare average annual income of an Indian citizen

 

India’s per capita income in Dollar terms is around $1,715 which is low compared to some of its neighbors. It reached a record high of $1963.55 in 2017.

When the average annual individual income of a citizen in exchange rate terms crosses $4,500, the country is classified as a middle income Nation.

India is way below the mark and cannot be called a middle income Nation just yet. High income Nations have an average annual individual income above $12,500. Countries like US, Singapore, Qatar, Saudi Arabia, Norway, Ireland, Australia, Japan and of course France are high income nations.

 

SEE ALSO: Income Tax E-filing For Gifts Received During The Year 2018

 

2. Is India an economic superpower?

 

India is the sixth largest economy just ahead of France with UK and Germany in its sights. The per capita income of India in dollar terms is under $2,000. India needs to have at least $4,500 in per capita income, before it can be called a middle income Nation.

India has to go a real long way before it can become a high income Nation. A high income nation has a per capita income of $12,500.

So when will India become a middle income Nation? Well, India’s per capita income needs to grow by around 6.5% each year for a decade before it can be called a middle income Nation. This is not easy and India could get there in the late 2020s.

Consider this….Brazil, South Africa and Mexico have been middle income Nations for more than 20 years and might never become high income Nations. These Nations are stuck in what is called the Middle Income Trap.

So, India could become a middle income Nation by 2030. Now comes the tough part. India has to grow by 7.5-7.7% each year so that it can become a high income Nation by 2050. India has to get pretty much everything right to avoid falling into the middle income trap.

Growing at nearly 8% each year for 25-30 years is not a joke. The quality of education is poor and great strides are needed in the quality of educational institutions, before India becomes a well educated Nation and quality of human resource improves. Structural reforms in the economy are necessary if India has to get there.

 

Be Wise, Get Rich.

 

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