India Becomes World’s Fourth-Largest Economy, Surpasses Japan

India’s New Global Economic Standing

India has officially emerged as the world’s fourth-largest economy , overtaking Japan with a nominal GDP of $4.18 trillion . According to official projections, India is now poised to surpass Germany within the next three years , potentially reaching a GDP of $7.3 trillion by 2030 . This achievement highlights India’s sustained economic momentum at a time when many global economies are grappling with trade disruptions, geopolitical tensions, and policy uncertainty.

Accelerated Growth in FY 2025–26

India’s real GDP recorded a robust 8.2 per cent growth in the second quarter of FY 2025–26 , the highest in six quarters. This followed growth rates of 7.8 per cent in Q1 and 7.4 per cent in the final quarter of FY 2024–25. Real Gross Value Added (GVA) also expanded by 8.1 per cent , driven mainly by industrial production and a strong performance in the services sector, underlining the economy’s structural resilience.

Consumption and Credit Driving Momentum

Domestic demand remains the backbone of India’s growth. Private consumption has strengthened, supported by falling unemployment levels, improving export performance, and sustained credit expansion to businesses. Urban demand has shown particular resilience, aided by stable financial markets and inflation remaining below the lower tolerance band , boosting purchasing power.

Policy Reforms and Institutional Support

Growth has been reinforced through income tax and GST rationalisation , moderation in global crude oil prices, and front-loaded public capital expenditure. Accommodative monetary and financial conditions have further supported investment. Reflecting these positives, the Reserve Bank of India revised its FY 2025–26 growth forecast upward to 7.3 per cent , from an earlier estimate of 6.8 per cent.

Forward Outlook

With favourable agricultural prospects, healthy corporate and banking balance sheets, and continued reform momentum, India appears well-positioned for sustained expansion. Analysts describe the current phase as a rare “goldilocks” period —characterised by high growth and low inflation—cementing India’s place among the fastest-growing major economies globally.

Important Facts for Exams

• India became the fourth-largest economy in nominal GDP terms in 2025

• Real GDP grew 8.2% in Q2 FY 2025–26 , a six-quarter high

• RBI revised FY 2025–26 growth forecast to 7.3%

• India aims to become a high middle-income economy by 2047