Shivanand Pandit
A senior Indian official has asserted that India has surpassed Japan to become the world’s fourth-largest economy — a symbolic milestone that, if true, marks a significant moment in the country’s economic journey. The statement came from B.V.R. Subrahmanyam, head of NITI Aayog, the Indian government’s public policy think tank. He further predicted that India is on track to overtake Germany and become the third-largest economy globally, trailing only the United States and China, within the next three years. While the announcement has been widely celebrated in Indian media, the excitement may be premature. The claims seem to be based on future projections from the International Monetary Fund (IMF) rather than current, confirmed economic data. Even if India does achieve this ranking soon, it’s essential not to lose sight of the country’s pressing challenges, including entrenched socioeconomic inequalities and widespread developmental disparities.
According to the IMF’s World Economic Outlook released in April 2025, India’s GDP for FY25 is projected at $3.91 trillion, while Japan’s GDP for calendar year 2024 is estimated at $4.03 trillion. Based on these figures, India continues to be the world’s fifth-largest economy, for the time being. The IMF anticipates that India will surpass Japan in FY26, with India’s GDP expected to reach $4.187 trillion, narrowly overtaking Japan’s projected $4.186 trillion for the calendar year 2025. While a change in global economic rankings seems likely, the IMF data referenced by Subrahmanyam does not yet confirm that India has risen to the fourth position. Since the IMF does not independently gather data but instead uses official figures provided by national governments, with some adjustments, any errors or inaccuracies in those government sources are also present in the IMF’s data.
The IMF and India use different methods to present yearly data. While India follows a fiscal year from April to March, the IMF labels this data according to the calendar year for global consistency. As a result, India’s financial year 2024–25 is referred to as ‘2024’ in IMF reports. This labelling can be confusing. For instance, the IMF projects that India will surpass Japan in economic size in FY 2025–26, but the data appears under the year ‘2025’ in the IMF tables. It may give the mistaken impression that India has already overtaken Japan when, in reality, that milestone is expected only by the end of FY26.
Since Donald Trump’s victory in the U.S. presidential election in November 2024, the global economy has been gripped by mounting uncertainty. This unease has deepened following his early threats to impose steep protectionist tariffs. Such measures pose a dual risk: they could fuel inflation by disrupting global supply chains and potentially trigger a recession by stifling international trade and exports. The resulting atmosphere of unpredictability—exacerbated by volatile stock markets—has significantly affected currencies, gold prices, interest rates, capital flows, and global growth expectations. In such a volatile and uncertain environment, assessing which economies will be most affected—and to what extent—remains an arduous task. Under these conditions, forecasting GDP growth becomes more of an exercise in conjecture than in precision. Even a seemingly insignificant change of 0.014% in projections can render forecasts unreliable. History serves as a sobering reminder: during the 2008 global financial crisis, the IMF continued to predict positive growth until the collapse of Lehman Brothers in September, even though many economies had already slipped into recession. The Fund faced widespread criticism for failing to act on early warning signs. A similar scenario may be unfolding now. The IMF has yet to incorporate the potential consequences of Trump’s proposed tariffs or the risk of a full-blown trade war into its forecasts. While this may reflect a reluctance to spook markets with overly pessimistic outlooks, it also casts doubt on the credibility and realism of its current projections.
Although headline GDP suggests robust economic growth, India’s per capita GDP tells a different story. It offers a clearer view of the average income, living standards, and how prosperity is shared among the population. According to the World Inequality Report 2022, wealth and income in India are highly concentrated at the top. The richest 1% of the population holds more than 40% of the country’s total wealth, while the bottom 50% owns just 3%. In terms of income, the top 10% earn over 57% of the national total. This extreme disparity makes the commonly cited GDP per capita figure highly misleading. Although India’s GDP per capita is estimated at around $2,880, this figure represents a mean average skewed by the ultra-wealthy. If the top 1%, who control approximately $1.56 trillion of India’s $3.9 trillion GDP, are excluded, only $2.34 trillion remains for the remaining 99% of the population. For nearly 1.4 billion people, that brings the per capita GDP down to roughly $1,670. The picture becomes starker when we exclude the top 5%, who together control about 62% of the country’s wealth. In that case, the average per capita GDP falls to approximately $1,100, or less than ₹1 lakh annually. This stark reality reflects the economic condition in which a vast majority of Indians live and explains why the government is compelled to provide free food rations to over 800 million citizens. Among G20 countries, India ranks the lowest in per capita GDP. This stark disparity highlights the significant challenge of converting overall economic growth into widespread prosperity.
GDP for any given year is estimated using data collected from various sources for its different components, with the figures becoming final only after a significant time lag. Initially, a first advance estimate is released based on partial data during the year, followed by a second advance estimate as more information becomes available. Once the year ends, a revised estimate is announced, and only after another delay is the final estimate published. This means that definitive GDP data is typically confirmed two years after the reference year. For instance, the latest GDP release on February 28, 2025, included the second advance estimate for the current year 2024-25, the revised estimate for the previous year 2023-24, and the final estimate for 2022-23, which is two years prior. Therefore, it will only be in 2027 that it will be clear whether India’s GDP surpassed Japan’s in 2025.
Since the announcement of demonetisation in 2016-17, the Indian economy has faced four major shocks: demonetisation itself, the introduction of GST in 2017, the NBFC crisis in 2018, and the sudden nationwide lockdown in 2020. GDP estimation relies heavily on projections from the previous year and benchmarks from a reference year in the past. Such shocks disrupt this method, often leading to an overestimation of GDP figures. For example, during 2016-17, demonetisation caused widespread disruption — markets were empty, fruits and vegetables rotted in the fields, and many industries shut down. Despite this, official data indicated an impressive growth of over 8% for that year, when in reality the economy experienced a contraction. Before 2016-17, discrepancies in GDP estimates were relatively small, but since then they have become large and volatile, swinging between positive and negative values. It is often claimed that the production-side approach to calculating GDP is more reliable. However, this method has also been significantly affected by the nature of these economic shocks, resulting in considerable errors in GDP measurement.
Another common comparison arises when we look at China. When China became a $4 trillion economy, its per capita income was already around $3,500. Today, after a decade of rapid economic progress, China’s economy has expanded to $19.23 trillion, and its per capita income has surged past $13,000. In contrast, the United States — the world’s largest economy with a GDP of $30.51 trillion — boasts a per capita income of nearly $89,000. Even if India climbs two more ranks to surpass both Japan ($4.19 trillion) and Germany ($4.74 trillion), our per capita income will remain far below that of other leading economies. Think of Japan — the image that comes to mind is one of bullet trains, gleaming skyscrapers, and cherry blossoms falling gently onto spotless streets. So here’s the crucial question: What does it mean for ordinary Indians if the country becomes the world’s fourth-largest economy? Will it improve their quality of life? Will it stimulate domestic consumption? Will it make a tangible difference to their everyday lives, or will the benefits remain concentrated at the top?
A milestone on paper
India, paradoxically, might be the antithesis of a Potemkin village. Where Grigory Potemkin allegedly erected fake facades to impress Empress Catherine the Great, projecting a prosperity that didn’t exist, India does the opposite — it looks worse than it is. Beneath the dust, the dysfunction, and the daily chaos lies a country far more complex and capable than its surface suggests.
Yes, potholes still transform into swirling sinkholes after a monsoon downpour. Yes, public hygiene and civic sense in some areas remain embarrassingly “Fourth World.” And yes, many government offices still operate with the nostalgic inefficiency of a printer abandoned in 1991. There’s undeniable wealth in the country, but it doesn’t trickle down as much as it evaporates into the safety of gated communities and luxury enclaves.
In truly affluent nations, even the wealthy step outside to enjoy public spaces or mingle with society. Here, bubbles are preferred — not just to isolate from the noise, but to insulate from the failure of basic civic systems. And yet, there it is: the stamp of official prestige. India is now the world’s fourth-largest economy, behind only the U.S., China, and Germany. It’s a milestone worth acknowledging, but not without context.
Because while the thermometer may say 30°C, we all know it feels like 48°C. Similarly, while India may be ranked fourth in the global economic pecking order, life for millions still reflects the symptoms of a nation struggling to rise. Luxury malls cast shadows over sprawling garbage dumps. World-class hospitals tower beside pavements where the homeless sleep. Roads, pockmarked and neglected, cry out for care.
We often compare ourselves to Japan, marvelling at their efficiency, order, and cleanliness. But where their streets reflect civic pride and discipline, ours are often a testament to collective apathy. The global image of India continues to wrestle with stereotypes — chaotic, polluted, and trapped in time. The tragedy? Many of us have started believing this, too.
There is a jarring disconnect between economic growth and everyday life. Prosperity isn’t measured solely in GDP charts — it must be felt in schools, streets, hospitals, and homes. And development isn’t just the government’s responsibility; it is ours too.
Until every citizen experiences progress — not as a statistic, but as a lived reality — India’s economic rank will remain just that: a number. Impressive on paper, perhaps, but unconvincing in truth.
The writer is a tax specialist, financial adviser, author, guest faculty and public speaker based in Goa. He can be reached at [email protected] or 9822983420
