New Delhi: India has emerged as the world’s fourth-largest economy, overtaking Japan with a nominal GDP of about $4.18 trillion, according to the government’s end-of-year economic review, reinforcing its position as the fastest-growing major economy despite global uncertainties. The review said India is on track to surpass Germany to become the third-largest economy within the next two-and-a-half to three years, with GDP projected to reach around $7.3 trillion by 2030.
Growth momentum strengthened through the current fiscal year, with real GDP expanding 8.2% in the second quarter of 2025-26, accelerating from 7.8% in the first quarter and 7.4% in the final quarter of the previous fiscal, marking a six-quarter high.
This expansion has been driven primarily by strong domestic demand, especially robust private consumption, while financial conditions have remained supportive with healthy credit flows to the commercial sector.
The government said the performance reflects India’s economic resilience amid persistent global trade uncertainties, including pressures arising from higher US tariffs linked to India’s purchases of Russian oil.
Cautious Projections
International agencies have broadly echoed this optimism, though with more cautious projections. The IMF has forecast India’s GDP at $4.51 trillion in 2026 compared with Japan’s $4.46 trillion, noting that official confirmation of India overtaking Japan will depend on revised annual data due next year.
The IMF has raised India’s growth outlook to 6.6% for 2025 and 6.2% for 2026, while the World Bank projects 6.5% growth in 2026. Moody’s expects India to remain the fastest-growing G20 economy, with growth of 6.4% in 2026 and 6.5% in 2027. The OECD forecasts 6.7% growth in 2025 and 6.2% in 2026, S&P anticipates 6.5% growth in the current fiscal and 6.7% next year, the Asian Development Bank has lifted its 2025 forecast to 7.2%, and Fitch has raised its FY26 projection to 7.4% on stronger consumer demand.
At the same time, structural challenges remain evident. India’s GDP per capita stood at about $2,694 in 2024, far below Japan’s $32,487 and Germany’s $56,103, underscoring income disparities despite rapid headline growth.
With more than a quarter of India’s 1.4 billion population aged between 10 and 26, and the country still struggling to create enough well-paid jobs for young graduates, the government has acknowledged that sustaining high growth will hinge on generating quality employment and ensuring inclusive, sustainable development as India works toward its goal of achieving high middle-income status by 2047, the centenary year of its independence.
(Cover photo by Atharva Tulsi on Unsplash)