ALBAWABA- India has surpassed Japan to become the world’s fourth-largest economy by nominal gross domestic product, marking a major milestone in its ascent as a global economic power.
The Indian government announced on December 30, 2025, that the country’s GDP has reached $4.18 trillion, edging past Japan’s estimated $4.1 trillion. The new ranking places India behind only the United States, China, and Germany.
Officials said the shift reflects sustained high growth driven by strong domestic demand, expanding manufacturing capacity, and resilience in the services sector. The Reserve Bank of India (RBI) has revised its growth forecast for the 2025–26 fiscal year upward to 7.3%, reinforcing confidence in the country’s near-term outlook.
Government projections suggest India could overtake Germany by 2027 if current trends persist, supported by large-scale infrastructure spending, digital economy initiatives, and industrial policies promoted under Prime Minister Narendra Modi’s administration.
India has averaged more than 7% annual growth in recent years, benefiting from post-pandemic recovery, foreign direct investment inflows exceeding $80 billion annually, and the rapid expansion of its technology and startup ecosystems.
Economists describe the current phase as a “Goldilocks” period, combining strong growth with relatively contained inflation. However, structural challenges remain. Job creation has not kept pace with population growth and urbanization, while income inequality and labor-market pressures continue to test the sustainability of India’s expansion.
India’s rise in nominal GDP is also driven by scale. With a population exceeding 1.4 billion, compared with Japan’s roughly 125 million, aggregate output has grown rapidly even as per capita income remains modest. India’s per capita GDP stands at around $2,900, far below Japan’s approximately $33,000, highlighting a persistent gap in living standards despite headline economic gains.
The figures align with forecasts by international institutions, including the International Monetary Fund, which anticipated India’s move into fourth place in its October 2025 World Economic Outlook.
The milestone is likely to bolster investor sentiment and reinforce India’s growing role in the global economy, even as questions remain over the quality and inclusiveness of its long-term growth.
