India has overtaken Japan to emerge as the world’s fourth-largest economy, according to calculations in the Indian government’s latest end-of-year economic review, reflecting sustained high growth and a faster-than-expected expansion of economic activity.
The review said India’s gross domestic product (GDP) has reached around $4.18 trillion (€3.55 trillion) and, if current trends continue, the country is on track to surpass Germany within the next three years to become the world’s third-largest economy. On this trajectory, India would rank behind only the United States and China in overall economic size.
India’s growth momentum has strengthened in recent quarters. Real GDP expanded by 8.2% in the second quarter of the 2025–26 financial year, up from 7.8% in the previous quarter, marking a six-quarter high. Export performance has also improved, with merchandise exports rising to $38.13 billion in November from $36.43 billion in January, supported by gains in engineering goods, electronics, pharmaceuticals and petroleum products.
The review projects India’s GDP to reach $7.3 trillion by 2030. However, official confirmation of India’s ranking will depend on final annual GDP data due in 2026. The International Monetary Fund has separately indicated that India is likely to surpass Japan next year. Meanwhile, the Reserve Bank of India has revised its growth forecast for the 2025–26 financial year upward to 7.3%.
Government economists attributed the current expansion largely to strong domestic demand, particularly robust private consumption, even as global trade and policy uncertainty persist. The review described the period as a rare “Goldilocks” phase of high growth and low inflation, citing healthy corporate balance sheets, steady credit flows and ongoing structural reforms as key drivers of sustained expansion.
Despite the gains, significant challenges remain. India’s GDP per capita stood at $2,694 in 2024, far below levels in advanced economies such as Japan and Germany. As the world’s most populous country, with more than a quarter of its 1.4 billion people aged between 10 and 26, India faces the task of generating sufficient quality employment for its young workforce.
The government has introduced measures including tax cuts and labour law reforms to support growth after it slowed to a four-year low in the year ending March 31. At the same time, currency pressures have intensified, with the rupee touching a record low against the US dollar in early December amid trade uncertainties and higher tariffs on Indian goods.
India became the world’s fifth-largest economy in 2022 after overtaking the United Kingdom, according to IMF data, and its latest ascent underscores its growing weight in the global economy. (Source: DW)
