India is about to become the Commonwealth's largest economy – here are the challenges it will face on the way

In terms of wealth per head, or living standards, it will remain far behind the developed world and also China, which will have become a solidly middle-income country. But in terms of global power, it will be massive

Bangalore Market in Bangalore, India (Reuters)

This year, in all probability, India will pass the UK to become the Commonwealth’s largest economy. It is an extraordinary milestone and an achievement that in my book deserves to be shouted from the rooftops. You can have a debate about the influence, malign or benign, of British imperial rule. You can criticise the way in which bureaucratic regulation held back Indian growth for much of its post-independence period. And you can note – should note – that much of the additional wealth has been slow to trickle down through society. But it is a huge success story, and a pointer to the relationship between India and the rest of the world in the future.

Because there will be other milestones: on present trends, India will pass Germany in the 2020s to become the fourth-largest economy, and Japan sometime around 2040 to become the third, after China and the United States. In terms of wealth per head, or living standards, it will remain far behind the developed world and also China, which will have become a solidly middle-income country. But in terms of global power, it will be massive.

Of course all economic predictions can go seriously awry, and these (based on some economic work by HSBC a few years ago) may turn out to be over-optimistic. No one should play down the challenges the country faces. But given the size of its population, nearly 1.3 billion, and its competence in cutting-edge technologies, it is surely a realistic prospect.

There is a further twist. In the next few years India is forecast to pass China as the world’s most populous country. Actually it is possible that it already has done so, for there is a dispute about numbers, with India undercounting its population and China overcounting. But even if the official numbers are more or less correct, India with its higher birth rate and younger population still passes China soon.

There are, medium term, huge implications. How will India manage its relationship with China, the other emerging giant? What are the implications within the subcontinent; obviously most importantly, with Pakistan? And how can India harness the millions of its emigrants in the West, particularly in the US, to leverage its power?

But there is one more immediate implication that affects the UK. What does this mean for the Commonwealth?

There is a fashion to downplay the role of the Commonwealth as a post-colonial relic, for understandable reasons. People have pointed out that it is no substitute in trading terms for the UK’s relationship with Europe, and while overtures by Britain to its members have been greeted politely the potential trade numbers don’t really stack up. Besides, there is an understandable resentment towards the UK, which cut imports from Commonwealth countries when it joined what was then the common market. Were the UK to remain within the customs union, it would still be required to turn its back to Commonwealth suppliers.

But when India is the largest Commonwealth economy the dynamics change. Several of its other members, though much smaller, are likely to be among the fastest-growing in the world: Malaysia, Kenya, Nigeria and so on. The group becomes a balanced community, with three members of the top 10 economies – Canada is the other one – rather than a UK-centric operation. It becomes in relative terms a larger part of the world economy, and it will be a community in effect led by India. I think that’s great.