India Surpasses Japan to Claim Fourth Spot in Global Economy Rankings

India has officially overtaken Japan to become the world’s fourth-largest economy in nominal GDP terms. According to the Indian government’s year-end economic review released today, India’s nominal GDP at $4.18 trillion for 2025, edging past Japan’s figure and marking a significant milestone in the nation’s economic ascent.

This development positions India firmly behind only the United States, China, and Germany in the global rankings.”With GDP valued at $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 $7.3 trillion by 2030,” the official government statement declared.

While preliminary national estimates signal this shift, final confirmation is anticipated from the International Monetary Fund (IMF) in the first half of 2026, when revised and finalized data for calendar year 2025 will be published.

India’s journey to this position has been remarkable. Just a decade ago, the country ranked tenth globally. It surpassed the United Kingdom in 2022 to enter the top five, and earlier projections from the IMF’s April 2025 World Economic Outlook had forecasted this overtake of Japan with a narrow margin—India at around $4.187 trillion versus Japan’s $4.186 trillion.

The government’s latest assessment reflects updated calculations incorporating full-year data, exchange rate movements, and robust domestic performance. Despite challenges such as a weakening rupee (down about 5% against the dollar in 2025) and global trade tensions, India’s economy has demonstrated sustained momentum.

Key highlights from the year-end review include:

• Real GDP growth accelerating to 8.2% in the second quarter of FY 2025-26, the highest in six quarters.
• Inflation cooling significantly, dropping to 0.71% in November 2025 from higher levels earlier in the year.
• A supportive financial environment with healthy credit expansion and resilient consumer demand, particularly in urban areas.

The review describes the current macroeconomic landscape as a rare “Goldilocks period”—characterized by high growth paired with low inflation—bolstered by ongoing structural reforms, rationalized taxes, and accommodative monetary policy.

Eyes on the Third Spot: Overtaking Germany

Looking ahead, the government is optimistic about India’s trajectory. Projections indicate the economy could reach $7.3 trillion by 2030, sufficient to surpass Germany and secure the third position globally, trailing only the US and China.

This ambition aligns with broader forecasts from institutions like Morgan Stanley and S&P Global, which earlier predicted India could achieve third place as soon as 2027-2028, driven by factors such as:

• A young, expanding workforce amid global demographic shifts.
• Rising discretionary spending and a growing middle class.
• Infrastructure investments and policy initiatives like ‘Make in India’ and digital reforms.

The Reserve Bank of India has also upgraded its growth forecast for FY 2025-26 to 7.3%, citing sustained domestic demand, softer commodity prices, and government capital spending.

Global Context and ChallengesIndia’s rise comes as several advanced economies grapple with slower growth. Japan has faced stagnation due to an aging population and muted expansion (around 0.6% projected for recent years), while Germany contends with trade disruptions and near-zero growth in some periods.

Globally, the United States remains dominant with a projected GDP exceeding $30 trillion, followed by China at around $19 trillion. India’s per capita GDP, however, remains lower than peers, underscoring the need for inclusive growth to translate aggregate gains into broader prosperity.

As 2025 draws to a close, this milestone reinforces India’s status as one of the fastest-growing major economies, offering a beacon of stability in an uncertain world. With continued reforms and favorable demographics, the path to becoming the third-largest economy appears increasingly attainable in the coming years.

Signpost NewsDesk

Signpost News is an Imphal-based media house that focuses on delivering news and views from Northeast India and beyond.