What is GDP
India is the seventh-largest economy (GDP of $2.72 trillion) with the UK ($2.82 trillion) and France ($2.77 trillion) ahead in the pecking order
The top economies in the list include the US ($20.5 trillion), followed by China ($13.6 trillion), Japan ($4.9 trillion) and Germany ($3.9 trillion)
Gross domestic product (GDP) is the market value of all final goods and services from a nation in a given year. Countries are sorted by nominal GDP estimates from financial and statistical institutions, which are calculated at market or government official exchange rates. Nominal GDP does not take into account differences in the cost of living in different countries, and the results can vary greatly from one year to another based on fluctuations in the exchange rates of the country’s currency. Such fluctuations may change a country’s ranking from one year to the next, even though they often make little or no difference in the standard of living of its population.
Countries by GDP
The different phases of economic cycles toss economies around the world. However, it’s interesting to see that these top economies don’t budge easily from the positions they hold. When compared to the top 20 economies of 1980, 17 are still present on the list which means only three new entrants.
In addition to the key players remaining almost the same, the analysis reveals these economies are the engine of growth, commanding majority of the global wealth. The nominal GDP of the top 10 economies adds up to about 67% of the world’s economy, while the top 20 economies contribute almost 81%. The remaining 173 countries together constitute less than one-fifth to the world’s economy.
1. The United States GDP
US Nominal GDP: $19.39 trillion
US GDP (PPP): $19.39 trillion
The U.S. has retained its position of being the world’s largest economy since 1871. The size of the U.S. economy was at $19.39 trillion in 2017 in nominal terms and is expected to reach $20.41 trillion in 2018. The U.S. is often dubbed as an economic superpower and that’s because the economy constitutes almost a quarter of the global economy backed by advanced infrastructure, technology, and abundance of natural resources. While the U.S. economy is service-oriented, contributing almost 80% its GDP, it’s manufacturing merely contributes about 15% of its output.
When the economies are assessed in terms of purchasing power parity, the U.S. loses its top spot to its close competitor China. In 2017, the U.S. economy, in terms of GDP (PPP) was at $19.39 trillion while the Chinese economy was measured at $23.16 trillion. The gap between the size of the two economies in terms of nominal GDP is expected to lessen by 2023; the U.S. economy is projected to grow to $24.53 trillion by 2023 followed closely by China at $21.57 trillion.
2. China GDP
China Nominal GDP: $12.01 trillion
China GDP (PPP): $23.15 trillion
China has experienced exponential growth over the past few decades, breaking the barriers of a centrally planned, closed economy to evolve into a manufacturing and exporting hub of the world. China is often referred to as the “world’s factory” given its huge manufacturing and export base. However, over the years, the role of services has gradually increased and that of manufacturing as a contributor to GDP has declined relatively.
Back in 1980, China was the seventh-largest economy with a GDP of $305.35 billion while the size of the U.S. then was $2.86 trillion. Since it initiated market reforms in 1978, the Asian giant has seen an economic growth averaging 10% annually. In recent years, the pace of growth has slowed although it remains high in comparison to its peer nations.
The World Bank reported a spurt in China’s economic growth in 2017 for the first time since 2010, mainly driven by a cyclical rebound in global trade. It projects a growth of 6.6% in 2018 which would sober down to around 5.5% by 2023. Over the years, the difference in the size of the Chinese and the U.S. economy has been shrinking rapidly. In 2017, the Chinese GDP in nominal terms stood at $12.01 trillion, lower than the U.S. by $7.37 trillion.
In 2018, the gap is expected to reduce to $6.32 trillion and by 2023 the difference would be of $2.96 trillion. In terms of GDP in PPP, China is the largest economy with a GDP (PPP) of $23.15 trillion. By 2023, China GDP (PPP) would be $37.06 trillion. China’s huge population brings down its GDP per capita to $8,643.11 (seventy-second position).
Japan’s economy, the third largest in the world according to nominal GDP calculations, is market-driven, meaning that businesses, production, and prices shift according to consumer demand, not governmental action. Japan’s economy showed a GDP growth rate of 1.9% in 2017, 1% in 2018, and is estimated at 0.9% in 2019.
Factors contributing to the size of Japan’s economy are their electronic goods industry, which is the largest in the world, and their automobile industry, which is the third largest in the world. Japan’s electronics industry is praised for its innovation, which asserts Japan as a global leader in the field.
Despite its strengths, the Japanese economy faces formidable challenges going forward. The nation’s population is shrinking and predicted to drop below 100 million from 127 million by 2050. Additionally, the country’s ratio of public debt is the highest among the world’s developed nations; in 2017, national debt stood at 236% in comparison with GDP.
Unlike the U.S. and China, Japan isn’t a leader in natural resources. In fact, it comes up short in natural resources to uphold its rising population and advancing economy. It’s an island country with a volcanic, hilly landscape, which greatly diminishes the nation’s potential for output of agricultural products, petroleum, and raw materials.
4. Germany GDP
Germany Nominal GDP: $3.68 trillion
Germany GDP (PPP): $4.17 trillion
Germany is not just Europe’s largest economy but also the strongest. On the global scale, it is the fourth-largest economy in terms of nominal GDP with a $3.68 trillion GDP. The size of its GDP in terms of purchasing power parity is $4.17 trillion while its GDP per capita is $44,549.69 (17th place). Germany was the third-largest economy in nominal terms in 1980 with a GDP of $850.47 billion.
The nation has been dependent upon capital good exports which suffered a setback post-financial crisis of 2008. The economy grew by 1.9% and 2.5% in 2016 and 2017 respectively. However, the IMF has revised growth downwards to 2.2% and 2.1% respectively in 2019 and 2020 given the threat of rising protectionism and Brexit. To revise its manufacturing strength in the current global scenario, Germany has launched Industrie 4.0 — its strategic initiative to establish the country as a lead market and provider of advanced manufacturing solutions.
5. United Kingdom GDP
UK Nominal GDP: $2.62 trillion
UK GDP (PPP): $2.91 trillion
The United Kingdom, with a $2.62 trillion GDP is the fifth-largest economy in the world. When compared in terms of GDP purchasing-power-parity, UK slips to the ninth spot with a GDP-PPP of $2.91 trillion. It ranks 23rd in terms of GDP per capita which is $39,734.59. Its nominal GDP is estimated at $2.96 trillion during 2018, but its ranking is expected to slide to the seventh spot by 2023 with a GDP of $3.47 trillion.
Starting from 1992 until 2008, the economy of the UK witnessed an uptrend in each quarter. However, it witnessed a decline in its output for consecutive five quarters starting April 2008. The economy shrunk by 6% during these five quarters (between the first quarter of 2008 and the second quarter of 2009) and eventually took five years to grow back to the pre-recession levels, according to data from the Office of National Statistics.
The economy of the UK is primarily driven by the services sector which contributes more than 75% of GDP with manufacturing, the second prominent segment followed by agriculture. Although agriculture is not a major contributor to its GDP, 60% of the U.K.’s food needs are produced domestically, even though less than 2% of its labor force is employed in the sector.
France has reclaimed the spot of the sixth largest economy in the world, pushing India to the seventh spot again. As per IMF’s October numbers, the French economy is valued at $2.79 trillion and Indian economy at $2.69 trillion.
But the scenario could reverse next year. The IMF estimates that India would again be the sixth largest economy in 2019, valuing at $2.95 trillion. France’s economy in 2019 is expected to be at $2.84 trillion.
In July this year, a World Bank report stated that the Indian economy had become the world’s sixth-biggest, pushing France to seventh spot.
India’s GDP was valued at $2.59 trillion at the end of 2017, while the French economy stood at $2.58 trillion.
As of 2018, the top ten economies of the world are: US $20.51 trillion followed by China at second spot with $13.45 trillion, Japan at $5.07 trillion, Germany at $4.03 trillion, UK at $2.81 trillion, France at $2.79 trillion, India at $2.69 trillion, Italy at $2.09 trillion, Brazil at $1.91 trillion and Canada at $1.73 trillion.
India Nominal GDP: $2.61 trillion
India GDP (PPP): $9.45 trillion
India is the fastest-growing trillion-dollar economy in the world and the sixth-largest with a nominal GDP of $2.61 trillion. India is poised to become the fifth-largest economy overtaking the United Kingdom by 2019 as per the IMF projection. The country ranks third when GDP is compared in terms of purchasing power parity at $9.45 trillion. When it comes to calculating GDP per capita, India’s high population drags its nominal GDP per capita down to $1,982.
The Indian economy was just $189.438 billion in 1980, ranking 13th on the list globally. India’s growth rate is expected to rise from 6.7% in 2017 to 7.3% in 2018 and 7.5% in 2019, as drags from the currency exchange initiative and the introduction of the goods and services tax fade according to IMF.
India’s post-independence journey began as an agrarian nation, however, over the years the manufacturing and services sector has emerged strongly. Today, its service sector is the fastest-growing sector in the world, contributing to more than 60% to its economy and accounting for 28% of employment. Manufacturing remains as one of its crucial sectors and is being given due push via the governments’ initiatives such as “Make in India”.
Although the contribution of its agricultural sector has declined to around 17%, it still is way higher in comparison to the western nations. The economy’s strength lies in a limited dependence on exports, high saving rates, favorable demographics, and a rising middle class.
According to IMF’s projections for 2019, India is likely to be the fifth largest economy in the world surpassing both the UK and France.
The International Monetary Fund (IMF) has predicted India to grow at 7.4 per cent in 2018 and 7.8 per cent in 2019. The IMF has predicted the world’s economy to grow at 3.9 per cent over the next year.
In a new report titled “The World in 2050,” consulting firm PwC projects that India would be the second largest economy in the world with a share of 15 per cent in the world economy. India is predicted to surpass the US economy by the year 2040. This would make India the second largest economy in the world after China.