India overtakes Japan to become world’s fourth-largest economy: Govt

India has overtaken Japan to become the world’s fourth-largest economy, with a gross domestic product (GDP) of USD 4.18 trillion, according to a government release outlining key economic reforms and growth trends in 2025.

The government said India is now positioned to surpass Germany to become the world’s third-largest economy within the next 2.5 to 3 years, with GDP projected to reach USD 7.3 trillion by 2030.

The United States remains the largest global economy, followed by China.

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India continues to be the fastest-growing major economy, driven by strong domestic demand, robust private consumption, and improving financial conditions despite ongoing global trade uncertainties.

GDP growth hits six-quarter high

India’s real GDP grew by 8.2 per cent in the second quarter of 2025–26, marking a six-quarter high. This compares with growth of 7.8 per cent in the first quarter of the current fiscal and 7.4 per cent in the fourth quarter of the previous financial year.

The government said the growth momentum surprised on the upside, reflecting the economy’s resilience amid persistent global headwinds. Domestic demand, particularly urban consumption, played a central role in sustaining expansion, supported by strong credit flows to the commercial sector.

Global agencies raise India outlook

International agencies have echoed optimism over India’s growth trajectory. The World Bank has projected growth of 6.5 per cent in 2026, while Moody’s expects India to remain the fastest-growing G20 economy with growth of 6.4 per cent in 2026 and 6.5 per cent in 2027.

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The International Monetary Fund has revised its projections upward to 6.6 per cent for 2025 and 6.2 per cent for 2026. The OECD forecasts growth of 6.7 per cent in 2025 and 6.2 per cent in 2026. S&P projects 6.5 per cent growth in the current fiscal and 6.7 per cent in the next, while the Asian Development Bank has raised its 2025 forecast to 7.2 per cent. Fitch has upgraded its FY26 projection to 7.4 per cent, citing stronger consumer demand.

Inflation, jobs and exports improve

The government release also highlighted improving macroeconomic indicators. Inflation remains below the lower tolerance threshold, unemployment is on a declining trajectory, and export performance continues to strengthen.

Financial conditions have remained benign, with steady credit growth and firm demand conditions. The government reiterated its long-term goal of achieving high middle-income status by 2047, the centenary year of India’s independence, backed by structural reforms, sustained economic growth, and social progress.