India surpasses Japan to become world's fourth-largest economy, poised to overtake Germany soon: Report

India has overtaken Japan to become the fourth-largest economy globally, as confirmed by the Indian government's year-end economic review. According to the projections, India is on track to surpass Germany in the next few years and become the third-largest economy by 2028.

What is India's GDP?

India’s gross domestic product (GDP) has reached approximately $4.18 trillion, with forecasts suggesting it will grow to $7.3 trillion by 2030. On its current trajectory, India will only be behind the United States and China in terms of economic size. The country's GDP grew by 8.2% in the second quarter of the 2025–26 fiscal year, up from 7.8% in the previous quarter, marking the highest growth in six quarters.

Additionally, India’s export sector is performing well, with merchandise exports hitting $38.13 billion in November 2025, a rise from $36.43 billion in January. This boost is driven by growth in engineering goods, electronics, pharmaceuticals, and petroleum products. However, the official confirmation of these figures will only be available in 2026 when the final annual GDP numbers are published. The International Monetary Fund (IMF) has indicated that India is likely to surpass Japan in the coming year.

Also Read: Is gold still the ultimate safe haven in 2026? Here’s what banks and analysts forecast

What is driving the Indian economy?

The country's growth has largely been driven by domestic demand, especially robust private consumption, despite global trade challenges and policy uncertainty. The government described the current phase as a rare "Goldilocks" moment, combining high growth with low inflation. Strong corporate finances, steady credit flow, and ongoing reforms have set India on a path to sustained growth. With ambitions to reach high middle-income status by 2047, the centenary of its independence, India is building on solid foundations for both economic expansion and social progress.

What are the challenges for India's economy going forward?

Despite impressive growth, India’s income gap with advanced economies remains significant. In 2024, India’s GDP per capita stood at $2,694, which is about 12 times lower than Japan’s and 20 times less than Germany’s. As India’s population grew to 1.4 billion, it overtook China as the most populous nation in 2023. A major challenge lies ahead in creating enough well-paid jobs for millions of young graduates. However, the report remains optimistic, noting that India's demographic advantage, its young population, could fuel future growth if quality employment opportunities can be created.

This year, Prime Minister Narendra Modi introduced large-scale consumption tax cuts and labor law reforms to boost the economy, following a slowdown to a four-year low. However, the rupee faced challenges, hitting an all-time low against the dollar in December 2025, partly due to concerns about trade relations with the U.S. and the effects of higher tariffs on Indian goods. India surpassed the UK to become the world's fifth-largest economy in 2022, and now, with its rapidly expanding economy, it’s set to move into third place soon.