India has recently surpassed Japan to claim the title of the world’s fourth-largest economy. This milestone is highlighted in the Indian government’s latest economic review. It predicts India will soon outpace Germany and become the third-largest economy globally within the next three years.
India’s Economic Growth and Projections
India’s gross domestic product (GDP) is reported to be approximately $4.18 trillion, and is projected to reach $7.3 trillion by 2030. According to the review, this positions India just behind the United States and China.
Current Economic Performance
The country saw its real GDP grow by 8.2% in the second quarter of the 2025–26 financial year. This is an increase from 7.8% in the prior quarter and marks the highest growth rate seen in six quarters. Strong export performance was also noted, particularly in sectors like engineering, electronics, pharmaceuticals, and petroleum.
- Merchandise exports reached $38.13 billion in November.
- This was an increase from $36.43 billion in January.
Future Outlook and Challenges
Overall, the Reserve Bank of India has revised its growth forecast for the current financial year upwards to 7.3%. Growth is primarily fueled by robust domestic demand and high private consumption, even amid global trade uncertainties.
The government describes this period as a unique “Goldilocks” phase, characterized by high growth and low inflation, supported by steady credit flows and structural reforms. Prime Minister Narendra Modi has implemented tax cuts and labor law reforms to bolster economic activity.
Income Disparities and Employment Challenges
Despite these achievements, India faces significant challenges. The GDP per capita is currently about $2,694. This figure is approximately 12 times lower than Japan’s per capita income of $32,487. Furthermore, it is around 20 times less than Germany’s $56,103.
India also became the world’s most populous country in 2023, with over a quarter of its 1.4 billion residents aged between 10 and 26. Ensuring the creation of quality jobs for this young population is crucial for sustaining economic growth.
Global Context
The International Monetary Fund indicates that India will likely maintain its lead over Japan in the coming year. India became the fifth-largest economy in 2022, surpassing the United Kingdom’s GDP.
As India approaches its centenary of independence in 2047, it aims to achieve high middle-income status, emphasizing the importance of structural reforms and social progress to support sustainable economic growth.
