India to overtake Japan as world’s 4th largest economy in ’25

India is set to become the world’s fourth-largest economy by 2025, a year earlier than previously projected, NIKKEI Asia reported on Sunday, citing a revised estimate from the International Monetary Fund (IMF).

This means India, with an estimated GDP of $4.3398 trillion in 2025, will push Japan, with an estimated GDP of $4.3103 trillion, down to fifth place, according to the report.

The IMF’s revision is attributed in part to the depreciation of the Japanese yen against the US dollar. While the IMF slightly adjusted GDP forecasts for both countries in their local currencies, the weaker yen translates to a smaller Japanese economy when measured in dollars.

In contrast, India’s currency, the rupee, has remained relatively stable against the dollar, likely due to interventions by the Reserve Bank of India (RBI).

India’s economic rise has been remarkable. In 2014, its nominal GDP ranked only tenth globally. Now, the IMF projects India to become the world’s third-largest economy by 2027, surpassing even Germany.

This growth is fueled by a large and growing population, with the RBI anticipating seven per cent real GDP growth in fiscal year 2024.

Challenges Remain

Despite its impressive ascent, India still has a long way to go. Though its middle class is expanding, the nominal GDP per capita remains low, hovering around $2,500. This is significantly lower than China and only slightly higher than Bangladesh.