India Becomes World’s Fourth-Largest Economy, Set to Overtake Germany by 2030

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India has officially emerged as the world’s fourth-largest economy, surpassing Japan with a nominal GDP of $4.18 trillion. According to official projections, India is now on course to overtake Germany, the current third-largest economy. This is expected within the next three years. By 2030, India is projected to reach an estimated GDP of $7.3 trillion. The achievement highlights India’s sustained economic momentum. This comes at a time when many advanced economies face slowing growth. There are also trade disruptions and policy uncertainty.

Basis for becoming World’s 3rd Largest Economy: Strong GDP Performance in FY 2025–26

India’s macroeconomic performance has remained robust through FY 2025–26. Real GDP growth reached 8.2 per cent in Q2, the fastest pace in six quarters, following 7.8 per cent growth in Q1 and 7.4 per cent in the previous quarter. Gross Value Added (GVA) expanded by 8.1 per cent, driven primarily by manufacturing, construction, and high-value services such as IT, finance, and communications.

Industrial output has benefited from higher capacity utilisation. Infrastructure-led demand and steady investment flows have also contributed. Meanwhile, services continue to anchor growth through exports. They also drive growth through domestic consumption.

Domestic Demand as the Backbone of Growth

Unlike many export-dependent economies, India’s rise has been powered mainly by domestic demand. Private consumption remains resilient, supported by rising employment, improving wage conditions, and expanding credit availability. High-frequency indicators point to declining unemployment rates, steady consumer confidence, and improved export performance despite global headwinds.

Urban demand has strengthened further. This is aided by benign inflation. The inflation has remained below the lower tolerance band for much of the year. Rural demand is also showing signs of recovery, supported by better agricultural output and targeted welfare transfers.

Policy Reforms and Macro Stability

India’s economic ascent has been reinforced by structural reforms and policy support. Rationalisation of income tax and GST has been significant. There is moderation in global crude oil prices. Front-loaded capital expenditure on infrastructure has created strong multiplier effects. The government’s focus on logistics, digital public infrastructure, and manufacturing competitiveness under initiatives such as PLI schemes has enhanced productivity.

Reflecting these fundamentals, the Reserve Bank of India revised its FY 2025–26 growth projection upward to 7.3 per cent, citing strong balance sheets, controlled inflation, and supportive financial conditions.

Why India’s Rise Matters Globally

India’s ascent to the fourth position reshapes the global economic order. It strengthens India’s voice in multilateral forums such as the G20, IMF, and World Bank. It also enhances its attractiveness as a destination for global capital under the China+1 strategy. Sustaining this trajectory, however, will depend on continued reforms in labour markets, urbanisation, skilling, and export competitiveness.