India has overtaken Japan to become the world’s fourth largest economy, with its gross domestic product estimated at $4.18 trillion, marking a significant milestone in the country’s economic journey. The achievement places India behind only the United States, China and Germany in terms of nominal GDP, reflecting the country’s rapid expansion over the past decade.
The development comes at a time when India continues to record strong growth rates compared to many advanced economies, which are facing slower expansion due to inflationary pressures, geopolitical uncertainty and ageing populations.
Government reaction to the economic milestone
The government has attributed India’s rise in global economic rankings to sustained policy reforms, increased capital expenditure and strong domestic demand. Officials have stated that consistent focus on infrastructure development, manufacturing growth and digital transformation has helped create a stable foundation for economic expansion.
According to government sources, India’s economic resilience during global disruptions such as the pandemic and subsequent supply chain shocks has played a crucial role in maintaining momentum. The emphasis on fiscal discipline alongside growth-oriented spending has also been highlighted as a key factor.
Key drivers behind India’s economic growth
India’s growth has been driven by multiple sectors, with services continuing to remain the backbone of the economy. Information technology, financial services, tourism and digital platforms have contributed significantly to output and employment.
Manufacturing has also gained traction in recent years, supported by production-linked incentive schemes aimed at boosting domestic production and reducing import dependence. Increased public investment in highways, railways, ports and energy infrastructure has stimulated private sector participation and job creation.
In addition, rising consumption, a young workforce and rapid adoption of digital payments and e-governance systems have strengthened economic activity across urban and rural areas.
Why Japan slipped behind India
Japan’s economy, while still highly advanced, has been grappling with structural challenges such as weak domestic consumption, an ageing population and limited labour force growth. Currency depreciation has further impacted Japan’s nominal GDP in dollar terms, contributing to India’s rise in the rankings.
India’s comparatively higher growth rates and expanding market size have allowed it to surpass Japan despite lower per capita income levels.
What this means for India’s future
Economists believe that becoming the fourth largest economy enhances India’s global influence in trade negotiations, investment flows and international policymaking. However, experts also caution that maintaining high growth will require sustained reforms, job creation, skill development and improvements in education and healthcare.
The government has reiterated its long-term vision of transforming India into a developed economy, with continued focus on manufacturing competitiveness, innovation and inclusive growth. While the milestone marks a moment of pride, policymakers acknowledge that sustained progress will depend on translating economic size into improved living standards for all citizens.