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In a significant milestone for the Indian economy, India has officially surpassed Japan to become the 4th largest economy in the world in nominal GDP terms, as per the IMF World Economic Outlook (April 2025). According to NITI Aayog CEO B.V.R. Subrahmanyam, India’s GDP now stands at $4.19 trillion, marginally higher than Japan’s $4.18 trillion. This marks a historic moment, reflecting a shift in the global economic order and reaffirming India's rising stature on the world stage.

From Fifth to Fourth: A Decade of Accelerated Growth

India’s economic rise has been particularly notable over the past decade. From a GDP of $2 trillion in 2014, India has more than doubled its output to cross the $4 trillion mark in 2025. This rapid expansion has also been accompanied by a sharp rise in per capita income, which has grown from $1,438 in 2014 to $2,880 in 2025. In global rankings, India moved from the 5th position in 2024 to 4th in 2025, overtaking Japan and trailing only the United States, China, and Germany.

Factors Driving the Surge

India’s ascent is the result of multiple structural reforms and policy initiatives undertaken in recent years. Programs such as Digital India, Atmanirbhar Bharat, and the Production Linked Incentive (PLI) scheme have enhanced domestic manufacturing, boosted digital infrastructure, and encouraged self-reliance. The government’s focus on ease of doing business, tax reforms (GST, corporate tax rationalisation), and large-scale infrastructure investment under schemes like Gati Shakti have further catalysed growth.

Despite global trends towards supply chain diversification and reshoring, India continues to attract foreign companies due to its cost-effective labor, large consumer base, and improving logistics. For instance, companies like Apple continue to expand their operations in India, viewing it as a reliable manufacturing hub.

Strategic and Geopolitical Implications

India’s new economic position carries significant geopolitical weight. As the 4th largest economy, India’s influence in global financial institutions, climate negotiations, trade partnerships, and multilateral forums such as G20 and BRICS is set to grow. The achievement enhances investor confidence, thereby potentially increasing foreign direct investment (FDI) inflows.

Domestically, this growth presents an opportunity for addressing structural issues such as unemployment, regional disparities, and income inequality. The challenge ahead lies in ensuring that growth remains inclusive, sustainable, and innovation-driven.

Future Outlook

According to NITI Aayog, India is poised to surpass Germany within the next 2.5–3 years, potentially becoming the third-largest economy globally. For this, sustaining macroeconomic stability, boosting exports, enhancing skill development, and transitioning to a green economy will be crucial.

Conclusion

India’s rise to the 4th largest economy marks a defining moment in its development trajectory. It reflects not just statistical growth, but also the success of structural reforms, demographic potential, and policy resilience. As India prepares for its next leap, balancing economic dynamism with social equity will be the key to truly becoming a global economic leader.