India overtakes Japan as the world’s fourth-largest economy, set to surpass Germany by 2030: Govt

India has overtaken Japan to become the world’s fourth-largest economy, according to a government update on economic reforms released in 2025. With a Gross Domestic Product (GDP) of USD 4.18 trillion, India has moved ahead of Japan and is now behind only the United States, China, and Germany. The government has also said that India is on track to overtake Germany by 2030 and become the world’s third-largest economy.

The update highlights India’s strong economic performance over the past year. It says the country continues to be the fastest-growing major economy in the world. India’s real GDP growth stood at 8.2 per cent in the second quarter of the 2025–26 financial year. This marks a steady rise from 7.8 per cent in the first quarter and 7.4 per cent in the last quarter of the previous financial year.

Despite global challenges such as trade tensions, high interest rates in some countries, and geopolitical uncertainty, India’s economy has shown resilience. The government said this growth reflects strong domestic demand, stable financial conditions, and ongoing structural reforms.

Domestic demand powers economic rise

According to the government release, strong domestic demand has been the key driver of India’s economic growth. Private consumption, especially in urban areas, has remained strong and has helped keep economic activity moving. Spending on goods and services has increased as incomes improve and employment conditions remain stable.

The government said that India’s GDP is expected to reach around USD 7.3 trillion by 2030. If this projection holds, India will move past Germany within the next two-and-a-half to three years. This would mark a major milestone in India’s economic journey.

While the United States continues to be the largest economy in the world and China remains second, India’s rapid rise shows its growing importance in the global economy. Officials said that India’s large population, expanding middle class, and strong domestic market give it a clear advantage compared to many other economies.

Macroeconomic indicators also remain positive. Inflation is currently below the lower tolerance limit set by the Reserve Bank of India, which gives policymakers more room to support growth. Unemployment levels have been declining, indicating better job creation across sectors.

Exports have also started to improve gradually after facing pressure from weak global demand. At the same time, credit flow to businesses has remained healthy, supporting investment and expansion. Financial conditions remain stable, helping companies and consumers access funds more easily.

Urban consumption has strengthened further, adding to demand across sectors such as housing, automobiles, retail, and services. Officials said these trends show that India’s growth is not driven by a single sector but is broad-based.

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Global agencies back India’s outlook

Several global financial institutions have expressed confidence in India’s growth path. The World Bank has projected India’s economy to grow by 6.5 per cent in 2026. Moody’s has said that India will remain the fastest-growing economy among G20 nations, with growth of 6.4 per cent in 2026 and 6.5 per cent in 2027.

The International Monetary Fund (IMF) has revised its estimates for India, projecting 6.6 per cent growth in 2025 and 6.2 per cent in 2026. The Organisation for Economic Co-operation and Development (OECD) has forecast 6.7 per cent growth for 2025 and 6.2 per cent for 2026.

S&P Global expects India’s economy to grow by 6.5 per cent in the current financial year and 6.7 per cent in the next one. The Asian Development Bank has raised its growth forecast for 2025 to 7.2 per cent, citing strong domestic demand and improved investment activity.

Fitch Ratings has also upgraded its outlook, now expecting India’s economy to grow by 7.4 per cent in FY26. The agency pointed to stronger consumer spending as a key reason for its revised estimate.

The government said these forecasts show growing global confidence in India’s economy. It added that India is building strong foundations through economic reforms, infrastructure development, digital expansion, and social welfare programmes.

Officials also linked India’s long-term growth goals to its ambition of becoming a high middle-income country by 2047, when it completes 100 years of independence. The government said continued reforms, stable policies, and investment in human capital will play a crucial role in achieving this target.

Overall, the government believes that India’s rise to the position of the world’s fourth-largest economy is not just a numerical achievement but a sign of deeper structural strength. With strong domestic demand, improving macroeconomic indicators, and support from global institutions, India appears well placed to sustain its growth momentum in the coming years.

As global economic conditions remain uncertain, India’s performance stands out as an example of resilience and steady progress. The coming years will be crucial as the country works towards overtaking Germany and securing a place among the world’s top three economies.