India’s economy crosses Japan, reaches $4.18 trillion, set to challenge Germany within three years

India emerges as the world’s fourth-largest economy, driven by strong growth and structural reforms

January 1, 2026

India surpasses Japan in GDP rankings, targets third spot by 2030

India emerges as world’s fourth-largest economy amid global headwinds

India has officially overtaken Japan to become the world’s fourth-largest economy, and is on track to surpass Germany within the next three years, according to the government’s year-end economic review for 2025.

India’s nominal gross domestic product (GDP) has reached $4.18 trillion, placing it behind only the United States, China and Germany. While final confirmation will come with the release of annual GDP data in 2026, International Monetary Fund (IMF) estimates already indicate that India has crossed Japan this year. IMF projections for 2026 peg India’s GDP at $4.51 trillion, marginally higher than Japan’s $4.46 trillion.

In its report titled “2025: A defining year for India’s growth”, the government said India is “well-positioned to sustain momentum” and could overtake Germany to become the world’s third-largest economy within the next two-and-a-half to three years. The report projects India’s GDP to reach $7.3 trillion by 2030.

The government’s upbeat assessment comes despite global headwinds, including trade uncertainties and the impact of US tariffs imposed in August over India’s purchases of Russian oil. Officials said India’s economic performance reflects its resilience amid persistent global challenges.

India became the world’s fifth-largest economy in 2022 after overtaking the United Kingdom. In 2023, it also surpassed China to become the world’s most populous nation. While India’s overall economic size has expanded rapidly, income levels remain significantly lower, with GDP per capita estimated at $2,694 in 2024, compared with Japan’s $32,487 and Germany’s $56,103, according to World Bank data.

The government highlighted India’s demographic advantage, noting that over a quarter of its 1.4 billion population is aged between 10 and 26. However, it stressed that sustaining growth will depend on the country’s ability to generate quality employment for millions of young workers.

India’s growth outlook remains strong, with major global institutions projecting continued expansion. The World Bank has forecast 6.5 per cent growth in 2026, while Moody’s expects India to remain the fastest-growing G20 economy. The IMF, OECD, S&P, Asian Development Bank and Fitch have all revised growth estimates upward, citing strong domestic demand and structural reforms.

Prime Minister Narendra Modi this year announced tax cuts to boost consumption and advanced labour law reforms after economic growth slowed to a four-year low in the previous fiscal year. The government reiterated that India is building the foundations for long-term, inclusive growth as it aims to achieve high middle-income status by 2047.

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