India Overtakes Japan as 4th‑Largest Economy, Report Says

By Richard Connor with AFP

In a landmark shift in the global economic order, India has overtaken Japan to become the world’s fourth‑largest economy, according to a government economic review and projections from the International Monetary Fund (IMF). The milestone reflects decades of rapid growth, structural reform, and demographic transformation — signaling India’s emergence as a central player on the world economic stage. �

The Economic Times +1

A Historic Economic Milestone

India’s nominal gross domestic product (GDP) is now estimated at **about $4.18 trillion, edging past Japan’s output, according to the Indian government’s end‑of‑year assessment. This jump places India behind only the United States, China, and Germany in the global economic rankings. �

The Economic Times

The government’s review underscores that India’s ascent to fourth place is not just symbolic — it reflects sustained high growth driven by strong domestic demand, resilient economic activity, and steady progress across key sectors. Officials also forecast that India could surpass Germany to become the world’s third‑largest economy within the next three years, with projected GDP of around $7.3 trillion by 2030. �

The Economic Times

However, official confirmation awaits the release of final annual GDP data for 2026, with IMF projections indicating that India’s economy will edge ahead of Japan’s next year. �

The Economic Times

Driving Forces Behind India’s Rise

Several factors have contributed to India’s remarkable economic momentum:

1. Robust Growth Rates

India’s growth has been among the fastest in the major economy group. Recent data show real GDP expansion exceeding 8 percent in mid‑2025, marking one of the strongest performances in years despite global economic uncertainties. �

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2. Strong Domestic Demand

A youthful and growing population — more than 1.4 billion people and rising — is fueling domestic consumption, investment, and services growth. This internal demand cushion has helped sustain output even when other major economies faced slowdowns. �

The New Indian Express

3. Improved Economic Indicators

India’s inflation has moderated, unemployment has declined, and exports have shown resilience. These “Goldilocks” conditions — where growth and price stability coexist — have supported broad‑based economic progress. �

The Economic Times

4. Policy Reforms and Investments

Strategic policy pushes in infrastructure, manufacturing, and digital transformation — such as large‑scale investment programs and initiatives like Digital India — have helped modernize sectors and draw both domestic and foreign investment. �

IMARC Group

Japan’s Economic Context

Japan, once the second‑largest economy in the world, has seen its GDP growth platform slip in recent decades due to structural challenges. Demographic headwinds — including an aging and shrinking population — coupled with periods of stagnation, low inflation, and slower productivity gains, have weakened its comparative growth trajectory. �

iibf.org.in

The shift in ranking is not just about India’s rising output; it also highlights medium‑term economic trends in other developed economies. Japan, for instance, was overtaken by Germany as the third‑largest economy some years ago, a reflection of both external pressures and long‑standing structural issues. �

The Guardian

Why This Matters

The reordering of global economic rankings carries both symbolic and practical significance:

• Geopolitical Influence

Being one of the top four economies amplifies India’s voice in global economic forums and multilateral institutions. This strengthens its ability to shape international policy on trade, finance, climate change, and development cooperation.

• Investment Appeal

A larger economy attracts foreign direct investment (FDI), venture capital, and multinational participation. India’s expanding middle class and digital economy make it a compelling destination for global capital. �

IMARC Group

• Domestic Confidence

For many in India, this milestone is a validation of decades of reform and economic liberalization. It reinforces optimism about the country’s long‑term prospects and the potential to improve standards of living over time.

Caveats and Future Challenges

Despite the milestone, experts caution that total GDP size is only one measure of economic progress. India’s GDP per capita remains much lower than that of Japan or other advanced economies, reflecting the reality of a large population where average incomes and living standards are still rising from a lower base. �

The New Indian Express

Other key challenges remain:

Job creation: While growth is strong, creating quality employment for millions of young graduates entering the workforce remains critical.

Inequality and regional disparities: Economic benefits are not evenly distributed across states or sectors.

Infrastructure gaps: Continued investment is needed to modernize transportation, healthcare, and education systems.

In this context, surpassing Japan’s GDP is a marker of progress — but not a culmination. As commentators have noted, “what counts is not only the size of the economy, but how prosperity is shared among the population.” �

The Times of India

Looking Ahead

With sustained growth and structural reforms, India is well‑positioned to continue climbing the economic rankings. If current trends hold, economic analysts project the country could challenge Germany for the third spot within the next few years. Beyond rankings, the focus for policymakers will be on inclusive growth, innovation, and resilience in a rapidly evolving global economic landscape.

For now, the milestone of overtaking Japan stands as a powerful symbol of India’s economic evolution — one that underscores both its achievements and the work that lies ahead. �