India has recently made news globally by overtaking Japan as the world’s fourth-largest economy in 2025. Such an achievement is indicative of the success India has had with its steady growth and important economic reforms.
Let's explore what this means, how India got here, and what’s next for the nation.
What Experts Are Saying
“India is in a strong position because of its size, digital strength, and demographic advantage.”
— Rakesh Mohan, former RBI deputy governor
“India’s economy is diversified and has shown resilience despite global challenges.”
— NITI Aayog expert on Times of India
India Overtakes Japan: The Numbers Behind the News
According IMF(International Monetary Fund), India’s Gross Domestic Product (GDP) hit $4 trillion in 2025, making it ahead of Japan in the global ranking. Now, only the United States, China, and Germany have larger economies than India.
This milestone did not occur overnight. India made steady progress over the years, reaching $1 trillion in 2007, $2 trillion in 2014, $3 trillion in 2021, and now $4 trillion in 2025. This consistent growth reflects India’s focus on economic reforms, innovation, and global integration.
NITI Aayog CEO BVR Subrahmanyam emphasized that India is not looking to stop here. The target is to surpass Germany and become the third-largest economy in the next 2.5 to 3 years. With an estimated GDP growth rate of 7-8% per year, this goal appears within reach..Economists point to India’s young workforce, growing digital economy, and infrastructure development as key drivers.
How India Overtook Japan
So, how did India manage to surpass Japan? Several factors played a key role.
First, India’s massive population of over 1.4 billion provides a large consumer market and a skilled and low-cost labor force. And whereas Japan is grappling with an aging population, India’s youthful demographic is driving its economic momentum.
On top of that, government initiatives like “Make in India” and the push for digital transformation through programs like Digital India have really energized the manufacturing and tech sectors.
Additionally, India’s service industry, especially in IT and startups, has also become a magnet for global investment. The country’s commitment to renewable energy, infrastructure development, and reforms in foreign direct investment (FDI) is starting to show results. For instance, FDI inflows surged to an impressive $83.6 billion in just the 2021-22 period. In contrast, Japan’s economy is dealing with issues like a declining workforce and sluggish growth, which is allowing India to narrow the gap.
What Led to India’s Growth?
Domestic Reforms: India has implemented major policy changes over the past decade, including tax reforms like GST, improvements in ease of doing business, and digitalization of government services.
Manufacturing Push: The ‘Make in India’ initiative has attracted foreign investment and positioned India as an alternative manufacturing hub, especially as global companies diversify supply chains.
Strong Private Consumption: Despite global slowdowns, India’s domestic consumption remains robust, driving steady economic activity.
Government Spending: Continued investment in infrastructure and asset monetization programs has boosted growth and created jobs.
Challenges Ahead
Despite the good news, India still has a few hurdles to overcome:
Low Per Capita Income: Economic growth needs to lead to higher incomes and improved living standards for everyone.
Job Creation: The nation has to generate enough jobs to accommodate its large and expanding workforce.
Global Uncertainties: Trade tensions and shifts in global demand can affect growth forecasts.
Infrastructure: Rural regions are still behind in terms of infrastructure and access to education, which could hinder progress if not addressed.
What’s Next for India?
Experts are saying that if India keeps up its current growth trajectory, it could actually overtake Germany and become the world’s third-largest economy in just the next 2.5 to 3 years. That would be an incredible milestone and would boost India’s standing in global economic and political matters.
According to the Deccan Herald, India’s startup scene, which is now the third-largest in the world, is a key driver of this growth, boasting over 100 unicorns valued at a whopping $350 billion. For the everyday Indian, this achievement is a beacon of hope. It translates to more job opportunities, improved living standards, and a stronger voice on the global stage. As India sets its sights on that coveted third position, the world is paying attention. With ongoing reforms and a collective effort, the vision of a “Viksit Bharat” (Developed India) by 2047 feels more attainable than ever.
Why This Matters Globally
India’s rise isn’t just a story for its people—it’s a narrative that resonates globally. As the nation continues to evolve, it’s stepping up as a significant player in tackling worldwide issues like climate change and the digital revolution. The ambitious goal of achieving 500 GW of non-fossil fuel capacity by 2030 showcases its commitment to renewable energy. Additionally, India’s cost-effective tech solutions are playing a crucial role in narrowing the digital gap across the globe.
In conclusion, India’s ascent to becoming the fourth-largest economy in the world is a moment of pride for its citizens. Fueled by reforms, robust consumer demand, and a supportive global environment, India is on the brink of even more remarkable accomplishments in the years to come. While there are still hurdles to overcome, the future looks bright as India sets its sights on becoming the world’s third-largest economy in the upcoming years.
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