India’s Leap to Fourth-Largest Economy: What the Numbers Say

Mumbai, 27 May – “Becoming the fourth-largest economy is a milestone, but the true challenge lies in ensuring that growth benefits all Indians,” said B.V.R. Subrahmanyam, CEO of NITI Aayog, reflecting the dual reality of India’s economic ascent.

India is set to officially surpass Japan to become the world’s fourth-largest economy this fiscal year, according to the International Monetary Fund (IMF). India’s nominal GDP in US dollars is projected to cross $4.2 trillion, driven by rising domestic consumption, investment reforms, and expanding global trade and manufacturing roles.

Third-Largest Economy by Purchasing Power Parity

Adjusted for purchasing power parity (PPP), which accounts for price differences across countries, India has already been the third-largest economy for several years. This measure better reflects the country’s domestic economic strength and purchasing power rather than just market size.

Source: IMF, World Inequality Database (2022 data)

Despite India’s surging GDP, individual prosperity still lags behind. At roughly $7,200 (PPP), India’s per capita income remains significantly lower than that of Japan ($32,800) and Germany ($56,000), underscoring the disconnect between aggregate economic size and what it translates to for the average citizen.

This imbalance reflects the broader reality of India’s two-speed economy. A growing segment of urban professionals, entrepreneurs, and investors is reaping the benefits of liberalisation, reforms, and global integration, enjoying income levels and consumption patterns on par with developed economies. In contrast, a large portion of the population remains trapped in informal or low-income work, with limited access to capital, skills, or social mobility. This divergence is not a recent development but one that has deepened over time, producing growth that is structurally uneven.

Often referred to as a ‘K-shaped’ trend, this phenomenon plays out in sectors where premium products, luxury real estate, and equity markets thrive on concentrated wealth, while mass-market goods and rural consumption remain under strain. The pandemic and subsequent recovery further accentuated these divides, with the upper end bouncing back strongly while the bottom decile still struggles to regain lost ground.

Recognising the need for broader inclusion, the government is doubling down on reforms intended to expand economic participation. Initiatives focused on skill development, infrastructure investment, and empowering state-level competitiveness are intended to push growth beyond traditional urban centres. Trade agreements with the UK, UAE, and Australia reflect a conscious effort to embed India more deeply into global value chains. The push toward formalisation and digitisation is expected to improve transparency and access for smaller enterprises.

Yet these efforts must go further. Manufacturing continues to underdeliver on job creation, agriculture remains low in productivity despite employing nearly half the workforce, and services—though high-growth—tend to benefit a limited set of skilled workers. Closing these structural gaps will require targeted reforms that prioritise human capital, regulatory simplification, and innovation at the grassroots.

India’s growth story remains compelling. If current trends hold, the country is poised to overtake Germany within the next 2–3 years and become the world’s third-largest economy. But scale alone is not the goal. The real measure of success will be how effectively this growth is translated into higher incomes, better jobs, and broader economic security for the millions still on the margins.

Bottom line: 

India’s rise to the position of the fourth-largest economy is an important milestone, but it is not the destination. To truly lead on the global stage, the country must ensure that its economic expansion is not only fast, but fair—and that its growth narrative includes every Indian, not just the fortunate few.