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

India overtakes Japan to claim the position of the world’s fourth-largest economy, according to the government’s end-of-year economic review. Officials are optimistic that India could overtake Germany within the next two-and-a-half to three years, as projected GDP growth continues.

Economic Growth on the Rise

With a current GDP valued at $4.18 trillion, India has now moved ahead of Japan, whose GDP stands at $4.46 trillion according to IMF projections for 2026. The government’s review highlights India as one of the fastest-growing major economies, well-positioned to maintain its momentum despite global trade uncertainties.

Challenges Behind the Numbers

While the headline figures are impressive, other indicators suggest challenges remain. India’s GDP per capita is $2,694, significantly lower than Japan’s $32,487 and Germany’s $56,103. The country also faces the pressing task of generating quality jobs for its growing workforce, particularly among young graduates.

Demographics and Future Prospects

India’s population exceeded China’s in 2023, making it the most populous nation in the world. More than a quarter of the population, roughly 1.4 billion, is aged between 10 and 26. Government reports stress that the nation’s growth story hinges on its ability to create employment that productively absorbs its young workforce while promoting inclusive, sustainable growth.

Policy Measures to Support Growth

Prime Minister Narendra Modi has introduced sweeping consumption tax cuts and labor law reforms to stimulate the economy after growth hit a four-year low. Despite a five percent drop in the rupee against the dollar in early December 2025, India continues to show resilience in the face of trade challenges, including tariffs imposed by Washington over Russian oil purchases.

India’s Rise on the Global Stage

India became the world’s fifth-largest economy in 2022, overtaking the United Kingdom. Now, with Japan behind and Germany in sight, India’s economic trajectory underscores the nation’s growing influence in the global financial landscape.