India is projected to become the fourth largest economy globally by the conclusion of 2025 (FY 2025-26), as stated in the International Monetary Fund (IMF) World Economic Outlook report published in April 2025. The IMF evaluates the size of an economy based on nominal GDP figures. Several years ago, India surpassed the United Kingdom to secure the fifth position and is now on track to ascend to the fourth position among the top 10 largest economies worldwide by surpassing Japan. Achieving the status of the world’s fourth largest economy is a significant accomplishment – India has progressed from being the 10th largest in 2014 to the 4th largest within 11 years under the leadership of the Modi government. During this period, its Gross Domestic Product (GDP) has more than doubled. What factors have contributed to this extraordinary growth of the Indian economy? Why does the per capita GDP figure convey a more concerning narrative? Furthermore, what steps must India take to evolve into a $5 trillion economy and secure its position as the world’s third largest?
India’s GDP growth has significant implications for the global economy:
- Increased Trade and Investment: As India’s economy expands, it attracts more foreign investment and strengthens trade relationships, particularly in manufacturing, technology, and services.
- Shift in Global Economic Power: India’s rise to the fourth-largest economy signals a shift in global economic dynamics, reducing reliance on traditional economic powerhouses like Japan and Germany.
- Resilience Amid Global Uncertainty: Despite global economic challenges, India’s growth remains stable, supported by strong domestic consumption and strategic reforms.
- Impact on Inflation and Commodity Prices: India’s demand for commodities, including oil and raw materials, influences global prices, affecting inflation trends worldwide.
- Technology and Innovation Leadership: India’s expanding digital economy and tech sector contribute to global advancements in AI, fintech, and software development.
- Geopolitical Influence: A stronger economy enhances India’s geopolitical influence, allowing it to play a more prominent role in international trade agreements and policy decisions.
India’s economic trajectory is shaping global markets, trade policies, and investment strategies.
