India Overtakes Japan To Become The Fourth Largest Economy

With GDP valued at USD 4. 18 trillion, India has surpassed Japan to become the world's fourth-largest economy and is poised to displace Germany from the third rank in the next 2.5 to 3 years with projected GDP of USD 7.3 trillion by 2030.

The growth momentum further surprised on the upside, with GDP expanding to a six-quarter high in Q2 of 2025-26, reflecting India's resilience amid persistent global trade uncertainties. Domestic drivers-led by robust private consumption-played a central role in supporting this expansion.

Tailwinds Behind India Displacing Germany as the 4th Biggest Economy

High-frequency indicators point to sustained economic activity: Inflation remains below the lower tolerance threshold, unemployment is on a declining trajectory, and export performance continues to improve. 
Furthermore, financial conditions have stayed benign, with strong credit flows to the commercial sector, while demand conditions remain firm, supported by a further strengthening of urban consumption.

Growth Momentum Strengthening: India's real GDP grew 8.2% in Q2 FY 2025-26, up from 7.8% in the previous quarter and 7.4% in Q4 of 2024-25, led by resilient domestic demand amidst global trade and policy uncertainties. Real gross value added (GVA) expanded by 8.1%, catalyzed by buoyant industrial and services sectors. 

Falling unemployment rates: The employment is the critical bridge between growth and prosperity. In India, where ~26% of the population is aged 10–24, this demographic moment presents a once-in-a-generation opportunity. As one of the world’s youngest nations, India’s growth story is being shaped by its ability to generate quality employment that productively absorbs its expanding workforce and delivers inclusive, sustainable growth.

In the backdrop of evolving macroeconomic and financial developments, RBI has reduced the policy repo rate by 25 basis points to 5.25% with a neutral stance. It signals growth-inflation balance, owing to a benign inflation outlook on both headline and core level, that continues to provide the policy space to support the growth momentum. The overall inflation path in 2025 reaffirmed the effectiveness of India’s inflation-targeting framework, with CPI outcomes remaining comfortably within the RBI’s prescribed band throughout most of the year.

Currently, the world's top three biggest economies are United States, China, followed by Germany.