India Overtakes France In GDP - But Bigger Does Not Mean Better

Raman Swamy

France has entered the final of the 2018 Football World Cup in Russia.   Everyone is exited – none more so than official statisticians in New Delhi India. 
 
Working feverishly, they looked through all the available economic data about France and India and came out with something to boast about – a World Bank report showing that India’s GDP is bigger than that of France.

By mid-afternoon on Wednesday, media outlets in India were awash with the feel-good story – that India had overtaken France to become the sixth biggest economy in the world.   It did not take social media very long to swing into action with a flood of posts and tweets bursting with pride.  

So, what if India is No. 97 in the FIFA football rankings?  India’s economy is now bigger than that of France.   Political tweets went even further - all credit to Prime Minister Narendra Modi for his vision and dynamism and a big ‘boo’ to all those who keep saying the BJP’s policies have ruined the economy.

The euphoria is entirely justified but the attempt to claim that all the growth has taken place in the last four years alone is far from the truth.  After the initial euphoria dies down, it will sink in that the Indian economy has been growing ever since 1999 and that in 2010 – four years before Modi became the Prime Minister – the GDP had actually touched double digits (10.26 per cent to be exact).  

Forbes magazine has even said in a recent in-depth analysis “India's economy hasn't had a down year in this century”.   Hence it is not just the present government’s policies or the previous two governments under Manmohan Singh and Atal Bihari Vajpayee before him. 

India’s economy is big because India’s population is big.  The one thing India has that other countries like France and Germany do not have is people -- lots of them.

With more than 1.3 billion people, India has three times the population of UK, France, Italy, and Brazil put together. But Brazil's output per capita is more than five times that of India. Britain's GDP per capita is in a different league altogether.

That is a sobering thought.  It puts the whole thing in perspective.  Being bigger does not mean being better.   What really counts is not just a higher GDP but a higher “GDP per capita”.

The truth is that India’s headline rate of economic growth may exceed 7 per cent but in real terms that breaks down to around 5.8 per cent annual growth in GDP per capita plus 1.3% annual growth in population.

As analysts in the World Economic Forum pointed out earlier this year - Rapid population growth does make India’s economy bigger.  Indeed, in another year or two India will become bigger than UK and emerge as the fifth largest in the world.   By 2022 or even earlier, the only economies bigger than India would be USA (currently 20 trillion dollars GDP), China (14 trillion), Japan (5 trillion) and Germany (4 trillion).   

But it doesn't help where it counts: it doesn't make people any better off.

If India is to really boost the economy in the long term, the most important thing is to bring down India's stubbornly high fertility rate.   Without population control, per capita GDP will remain low and India will continue to remain a third world country will millions of citizens struggling for survival. 

With each woman having an average of 2.43 children over the course of her childbearing years, India's fertility rate is among the highest outside Africa and the Middle East.  Indeed, global experts are unanimous that fertility reduction is the “single most robust predictor of future economic growth”.

Fertility reduction would also help India improve some of its other indicators, like its high infant mortality rate and its horrifying maternal mortality rate. Indian mothers are ten times as likely to die in childbirth as American mothers (and 20 times as likely as Europeans).

For the moment, Indians can take vicarious pleasure in having overtaken France in terms of GDP.  If France go on to lift the World Cup, Indians can feel even better - you may be football champions but our economy is bigger than yours. 

(Incidentally, the figures being trumpeted by the media are based on a 2017 World Bank report, whereas International Monetary Fund data for 2018 indicates that France could bounce back to sixth place with 2.93 trillion dollars GDP and India may slip back to seventh place with 2.85 trillion dollars). 

Just in case England win the World Cup, India can send out a warning - in another two or three years we will overtake you (the United Kingdom) too and become the fifth largest economy in the world! 

Footnote:  India’s Population: 1,324,171,354; Surface Area: 3,287,259 km2.

France’s Population:  67,221,943; Surface Area: 549,087 km2.

Frontier
Jul 14, 2018