India’s meteoric economic rise continues as the country is set to become the world’s fourth-largest economy, surpassing Japan, according to recent data from the International Monetary Fund (IMF). With a projected GDP of $4.187 trillion for 2025, India’s rapidly expanding economy is a testament to its robust growth trajectory and strategic reforms.
A Historic Milestone
India’s journey to economic prominence has been nothing short of remarkable. Ranking 10th in 2014, the world’s largest democracy is now on the verge of breaking into the top four economies, trailing only the U.S., China, and Germany. This growth comes as no surprise, as India has consistently been the fastest-growing major economy for years.
B.V.R. Subrahmanyam, CEO of India’s state-run think tank Niti Aayog, recently emphasized the significance of this milestone, noting, “We are the fourth-largest economy as I speak… and this is not my data. This is IMF data.”
However, while India’s GDP might soon outpace Japan’s, experts caution that the nation still has a long way to go in terms of per capita income and living standards.
Growth Drivers
Several factors have fueled India’s economic ascent:
Demographic Advantage: India’s young and educated population is a key driver of its growth. Malcolm Dorson, senior portfolio manager at Global X ETFs, referred to the country as a “fine-tuned compounding machine” benefiting from its vast pool of skilled labor and thriving technology and services sectors.
Consumption Boom: Domestic consumption, which constitutes over 56% of India’s economy, remains its strongest growth engine. Rural consumption, in particular, is on the rise, accounting for nearly 40% of consumer goods sales in early 2025, according to NielsenIQ.
Global Investments: As India’s economy grows, it continues to attract foreign investors eager to capitalize on its potential. Increased capital flows are expected to deepen the country’s financial markets and boost equity valuations.
Tactical Tailwinds: Lower oil prices and higher gold prices have also played a role in strengthening India’s economic position, given its reliance on energy imports and the cultural significance of gold in household savings.
Challenges Ahead
While the economic outlook is promising, sustaining growth will require extensive reforms. Shumita Deveshwar, chief India economist at TS Lombard, highlighted the stark disparity between India’s and Japan’s per capita GDP — $2,880 versus $33,960, respectively.
To bridge this gap, India must prioritize:
- Infrastructure Development: Investing in transportation networks and modern physical infrastructure.
- Education and Workforce Skills: Enhancing access to education and upgrading workforce skills to remain competitive globally.
- Policy Implementation: Accelerating reforms in labor, agriculture, and other sectors to boost productivity.
ANZ Bank’s economist Dhiraj Nim also stressed that India must strategically focus on industries where it holds a comparative advantage, rather than attempting to compete across all sectors.
The Road Ahead
Experts like Nim and Deveshwar agree that India’s rise to the fourth-largest economy is a “natural course of events.” However, the country still faces significant hurdles in improving the quality of life for its citizens and achieving inclusive prosperity.
Policymakers must ensure swift execution of reforms to maintain momentum and position India for long-term success. As Deveshwar aptly put it, “India needs to remain competitive and sustain its position as the world’s fourth — or eventually even third-largest economy.”
Global Trade and Innovation
India’s economic growth is also reshaping its global trade relationships. Negotiations for a U.S.-India trade deal are progressing, with a potential agreement expected by late June. Meanwhile, India has emerged as a significant player in the global smartphone market, with iPhone shipments to the U.S. skyrocketing by 76% year-over-year in April.
India’s healthcare sector is also drawing global attention. Private equity firms are investing in innovative hospital systems that serve rural populations while remaining financially viable — a model that could be exported to other emerging markets.
↔ 
↔ 
↔ 
↔ 
↔ 
↔ 
↔ 
↔ 
↔ 
↔ 
→ 
→ 
→ 
→ 
→ 
→ 
→ 
