India's economic trajectory continues on an upward trend, with recent reports indicating a significant milestone. NITI Aayog, the Indian government's premier policy think tank, has announced that India has surpassed Japan to become the world's fourth-largest economy. This declaration signifies a major shift in the global economic landscape and underscores India's growing influence.
According to NITI Aayog CEO B V R Subrahmanyam, India now boasts a USD 4 trillion economy, exceeding that of Japan. This information, substantiated by data from the International Monetary Fund (IMF), highlights India's robust economic performance and its potential for further growth. Several factors have contributed to this achievement, including consistent GDP growth, increasing GST collections, and manageable inflation levels.
The IMF projects that India's nominal gross domestic product (GDP) will rise to $4.187 trillion in 2025, slightly ahead of Japan's estimated $4.186 trillion. This transition reflects India's rapid economic expansion, driven by strong domestic demand, a youthful demographic profile, and structural reforms aimed at boosting productivity and enhancing the investment climate. While India's rise is noteworthy, the United States and China remain the world's two largest economies, with Germany maintaining a lead over India for the third position. However, projections suggest that India could overtake Germany by 2028 to become the third-largest economy.
India's economic growth is expected to continue, although at a slightly slower pace than in previous years. The IMF estimates India's GDP growth at 6.2% for fiscal years 2024-25 and 2025-26, making it the fastest-growing major economy. Deloitte forecasts annual growth of 6.3% to 6.5% in fiscal year 2024-25 and between 6.5% and 6.7% in the current fiscal year. These projections are supported by increased household spending, particularly in rural areas, driven by higher agricultural incomes and government support programs.
Several sectors contribute to India's economic strength. Traditional and modern agriculture, technology services, the handicraft industry, and business outsourcing are key drivers. The services sector is particularly important and the fastest-growing segment of the Indian economy. Moreover, government initiatives and policies play a crucial role in fostering economic growth. Efforts by the government and the Reserve Bank of India (RBI) to support economic expansion, coupled with favorable inflation rates, are expected to further boost GDP growth.
NITI Aayog has also emphasized the importance of exports in driving economic growth. A recent report by the think tank highlights the transformative potential of the hand and power tools industry for India's economic growth. The report suggests that India can target $25 billion in exports in the next 10 years, generating approximately 35 lakh jobs by achieving a 10% market share in power tools and 25% in hand tools. To achieve this, the report recommends developing world-class hand tool clusters with advanced infrastructure and addressing structural cost disadvantages through market reforms.
While India's economic outlook remains positive, challenges persist. These include infrastructure gaps, income inequality, and the need for further structural reforms to enhance competitiveness. Nevertheless, India's rise to become the world's fourth-largest economy is a testament to its economic resilience and growth potential. With continued focus on sustainable and inclusive growth, India is poised to play an increasingly important role in the global economy.
