MUMBAI – India has closed out 2025 with a major economic milestone. It has moved past Japan to become the world’s fourth-largest economy, with a nominal GDP estimated at $4.18 trillion.
The government’s year-end economic review, released on Monday, points to strong domestic demand, steady policy changes, and firm performance even as the global outlook stayed mixed.
The United States remains the largest economy, followed by China and Germany. India’s rise adds weight to a wider shift, where large emerging economies are narrowing the gap with long-established leaders.
The review calls 2025 a defining year for India’s growth story. It states that, with GDP at $4.18 trillion, India has overtaken Japan to take fourth place globally. It also says India could move ahead of Germany within the next 2.5 to 3 years, with GDP projected at $7.3 trillion by 2030.
The move up the rankings comes after a strong run of growth. India’s real GDP rose 8.2% in the July to September quarter of FY 2025-26, the fastest in six quarters. That compares with 7.8% in the quarter before and 7.4% in the final quarter of the last financial year. Private spending, firm urban demand, and government capital spending helped drive activity, even as global trade remained under pressure.
Recent high-frequency data suggests the pace has stayed steady. Inflation slipped below the RBI’s lower tolerance band, jobless numbers eased, exports improved, and credit growth stayed healthy. The current account deficit also narrowed, helped by strong services exports and remittance inflows.
Some economists have described the mix as a ‘Goldilocks moment’, with faster growth alongside lower inflation. They say this combination has kept India among the fastest-growing major economies.
India From Fifth Place to Fourth
The climb to fourth has been quick. In 2022, India overtook the United Kingdom to become the fifth-largest economy. Earlier IMF projections had suggested India would pass Japan in 2025 or 2026. Stronger-than-expected results have brought that change sooner.
Final IMF confirmation for the calendar year 2025 is expected in mid-2026. Even so, early estimates and government calculations back the claim. The Reserve Bank of India has also raised its FY 2025-26 growth forecast to 7.3%, pointing to broad strength across sectors.
Other major agencies still expect solid growth ahead. The World Bank forecasts 6.5% growth for India in 2026. Moody’s expects India to be the fastest-growing G20 economy at 6.4% to 6.5% over the next two years. The IMF has lifted its 2025 estimate to 6.6%.
Eyes on Third Place: What Comes Next
With Germany now the next target, the focus turns to keeping reforms on track across manufacturing, infrastructure, and the wider economy. Policies such as Production Linked Incentives (PLI), GST changes, and the infrastructure drive under schemes like PM Gati Shakti are highlighted as key building blocks.
Prime Minister Narendra Modi has often spoken about a $5 trillion economy on the way to Viksit Bharat by 2047. With the economy having grown quickly over the past decade, some projections suggest India could reach $7.3 trillion by 2030, which would put it in range of overtaking Germany.
Economists also flag a clear gap in living standards. India’s per capita income is around $2,700, far below Japan’s $32,000-plus and Germany’s $56,000. Closing that gap will depend on wider access to jobs, stronger skills training for a young workforce, and better outcomes across regions.
Japan’s slower pace, with growth near 0.6% amid an ageing population and long-running price pressures, stands in sharp contrast to India’s faster expansion. The difference highlights how demographics and policy choices can shape long-term growth.
Global Impact and Early Reactions
The step up to fourth place strengthens India’s standing on the world stage, including in groups such as the G20 and BRICS. Overseas investors have also taken notice, with foreign direct investment holding up.
NITI Aayog CEO BVR Subrahmanyam has described the milestone as a sign of India’s growing strength in manufacturing and services. Industry groups such as CII and FICCI have welcomed the move, while urging continued reforms that make it easier to do business and attract fresh investment.
As 2025 ends, the new ranking is more than a headline figure. It reflects a long shift in India’s economic story, and it sets a clear next aim, moving up to the world’s third-largest economy.
