India Overtakes Japan to Become World’s Fourth-Largest Economy

India has overtaken Japan to become the world’s fourth-largest economy, with GDP estimated at about $4.18 trillion and projected to reach $7.3 trillion by 2030. Strong domestic demand, rising exports, and robust GDP growth of over 8% have driven the expansion, while forecasts suggest India could surpass Germany within three years. Despite rapid growth and a youthful population, challenges remain in boosting per capita income, creating quality jobs, and managing currency and global trade pressures.

India has overtaken Japan to become the world’s fourth-largest economy, according to calculations contained in the Indian government’s end-of-year economic review. The assessment highlights India’s rapid economic ascent and reflects the momentum it has built over recent years through strong growth, expanding domestic demand, and ongoing structural reforms.
Based on current trends, the review projects that India is likely to surpass Germany within the next three years, which would make it the world’s third-largest economy. The government estimates that India’s gross domestic product has already reached approximately $4.18 trillion (€3.55 trillion) and is on track to rise to about $7.3 trillion by 2030. If these projections hold, India would be behind only the United States and China in terms of overall economic size.
Economic growth has remained robust in the near term. India’s real GDP expanded by 8.2% in the second quarter of the 2025–26 financial year, up from 7.8% in the preceding quarter and representing the strongest performance in six quarters. This acceleration underscores the resilience of the economy despite persistent global uncertainties.
The review also noted a strengthening in export performance. Merchandise exports climbed to $38.13 billion in November, compared with $36.43 billion in January. This increase was driven largely by higher shipments of engineering goods, electronics, pharmaceuticals, and petroleum products, sectors that have benefited from both global demand and domestic policy support.
However, official confirmation of India’s ranking as the fourth-largest economy will depend on final annual GDP data scheduled for release in 2026. The International Monetary Fund, for its part, has indicated that India is expected to surpass Japan next year, lending further support to the government’s assessment.
The Reserve Bank of India has echoed the optimistic outlook by revising its growth forecast for the 2025–26 financial year upward to 7.3%. According to the review, growth has been driven primarily by domestic demand, with private consumption playing a particularly strong role, even as global trade conditions and policy environments remain uncertain.
The government characterized the current phase of economic development as a rare “Goldilocks” period, marked by a combination of high growth and relatively low inflation. It pointed to strong corporate balance sheets, steady credit flows, and the continuation of economic reforms as factors that have positioned the country for sustained expansion. The review emphasized that India ranks among the world’s fastest-growing major economies and is well placed to maintain this momentum in the years ahead.
Looking further ahead, the government reiterated its ambition of achieving high middle-income status by 2047, the centenary year of India’s independence. It said the country is building on solid foundations of economic growth, structural reforms, and social progress to realize this long-term goal.
Despite the gains in overall economic size, the review acknowledged that income disparities with advanced economies remain significant. According to the latest World Bank data, India’s GDP per capita stood at $2,694 in 2024, which is about 12 times lower than Japan’s $32,487 and roughly 20 times below Germany’s $56,103. This gap highlights the challenge of translating aggregate economic growth into higher living standards for the broader population.
Demographic factors continue to shape India’s economic trajectory. By population, India overtook neighboring China in 2023 to become the world’s most populous country. Government figures show that more than a quarter of India’s 1.4 billion people are between the ages of 10 and 26. While this youthful population offers a potential demographic dividend, creating enough well-paid jobs for millions of young people entering the workforce remains a major challenge.
The review nevertheless struck an optimistic tone, noting that as one of the world’s youngest nations, India’s growth story will depend on its ability to generate quality employment that productively absorbs its expanding workforce and delivers inclusive and sustainable growth.
Earlier this year, Prime Minister Narendra Modi introduced sweeping consumption tax cuts and advanced labor law reforms after economic growth slowed to a four-year low in the 12 months ending March 31. These measures were aimed at stimulating demand, improving labor market flexibility, and supporting long-term growth.
At the same time, currency pressures have increased. The Indian rupee fell to a record low against the US dollar in early December after depreciating by about 5% in 2025. The decline came amid concerns over the absence of a trade deal with Washington and the potential impact of higher levies on Indian goods.
India’s rise in the global economic rankings has been steady in recent years. The country became the world’s fifth-largest economy in 2022, when its GDP overtook that of former colonial ruler Britain, according to IMF figures. The latest developments mark another milestone in India’s transformation into a major global economic power.