India has crossed a major economic milestone, overtaking Japan to become the world’s fourth-largest economy, according to figures outlined in New Delhi’s latest end-of-year economic review.

The development underscores the country’s sustained growth momentum and strengthens expectations that India could soon rise even further in the global economic hierarchy.

The review estimates India’s gross domestic product at approximately $4.18 trillion, placing it ahead of Japan and behind only the United States, China, and Germany, reports dw.com

Based on current growth trajectories, Indian policymakers believe the country is on track to surpass Germany within the next three years, potentially securing third place worldwide.

Economic expansion has accelerated faster than earlier projections. Real GDP growth reached 8.2 percent in the second quarter of the 2025–26 fiscal year, the strongest performance in six quarters.

This rebound has been supported by resilient domestic demand, with private consumption emerging as a key driver despite lingering global trade uncertainties.

India’s export sector has also shown renewed strength. Merchandise exports climbed steadily through the year, reaching more than $38 billion in November, buoyed by strong demand for engineering products, electronics, pharmaceuticals, and refined petroleum goods. Officials say this diversification has helped cushion the economy from external shocks.

The Reserve Bank of India recently raised its full-year growth forecast to 7.3 percent, reflecting confidence in the country’s macroeconomic fundamentals. Government economists described the current phase as a rare moment of balance — robust growth paired with relatively contained inflation — supported by healthier corporate balance sheets, steady credit availability, and years of structural reform.

Looking ahead, the review projects India’s GDP could expand to $7.3 trillion by 2030, positioning the country as the world’s third-largest economy, trailing only the US and China. However, officials caution that headline economic size masks deeper challenges.

Despite its growing aggregate output, India’s per capita income remains far below that of advanced economies. Average income levels are a fraction of those in Japan and Germany, highlighting the scale of development still required to translate national growth into widespread prosperity.

Demographics add both promise and pressure. More than a quarter of India’s 1.4 billion citizens are between the ages of 10 and 26, making job creation a central policy challenge.

The government acknowledges that sustaining growth will depend on generating quality employment capable of absorbing a rapidly expanding workforce.

Recent policy measures, including tax relief and labor reforms, are aimed at sustaining consumption and improving competitiveness. Yet risks remain, including currency pressures, global trade tensions, and the need to secure long-term investment.

Still, officials argue that India’s trajectory reflects a structural shift rather than a temporary surge—marking a decisive step in the country’s ambition to emerge as a leading global economic power by the centenary of its independence in 2047.