New Delhi: Two of the world’s leading economies – Japan and the UK – recently entered into recession, highlighting the financial struggles that countries have been facing after the Covid pandemic.
Britain recently revealed a 0.3 percent contraction in the fourth quarter of 2023 and has officially entered a recession. This economic setback poses a formidable challenge for Prime Minister Rishi Sunak, whose Conservative party faces the prospect of a general election later this year.
Simultaneously, Japan, once poised to become the world’s largest economy, has also been struggling to recover after the Covid pandemic which crippled the country’s finances. Japan has now slipped to the fourth position below Germany in the list of the world’s largest economy.
Germany is already grappling with challenges in its export-dependent manufacturing sector and faces headwinds from soaring energy prices following Russia’s invasion of Ukraine. Moreover, the European Central Bank’s decision to raise interest rates and uncertainties surrounding the budget, coupled with a chronic shortage of skilled labor, further hamper Germany’s economic growth.
The spotlight has now turned on India, which has emerged as a beacon of opportunity for investors. Projections from the International Monetary Fund suggest that India is poised to overtake both Japan and Germany in terms of economic output, with estimates placing the shift in 2026 and 2027, respectively.
India remains the fastest-growing large economy and its growth is projected to reach 6.2 per cent in 2024, according to the World Economic Situation and Prospects 2024 report.
India is currently the world’s fifth-largest economy, placed behind the US, China, Japan and Germany.
The Gross Domestic Product (GDP) of the US in 2023 was $27.94 trillion, while China’s was $17.5 trillion. India’s GDP is about $3.7 trillion but growing at a sizzling rate of around 7%.
India is benefiting from growing interest from multinationals, which see the country as a key alternative manufacturing base in the context of developed economies’ supply chain diversification strategies.
The gap between developed countries and emerging nations is shrinking, with India now all set to capitalise on the opportunity to become a significant player in the global economic landscape. The shifting dynamics present a moment for India to assert its influence and contribute substantially to global growth in the coming years.
