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India has officially outpaced Japan to become the world’s fourth-largest economy, marking a historic leap that carries profound implications for its future and global influence.Speaking at a press conference after the 10th Governing Council meeting of NITI Aayog, the think tank’s CEO, B V R Subrahmanyam, confirmed: “We are the fourth largest economy as I speak. We are a $4 trillion economy as I speak,” Subrahmanyam said, as quoted by PTI.The peg of this remarkable story lies not only in India’s growing GDP but in how this economic metamorphosis reflects shifts in global power, opportunities for young Indians, and the structural evolution of the country’s mixed economy.
Understanding GDP and its impact on students
GDP, or Gross Domestic Product, is the total monetary value of all goods and services produced within a country’s borders in a specific time frame. It is a broad indicator of a nation’s economic health, and for students—particularly those studying economics, public policy, or international relations—grasping the implications of GDP is essential.The International Monetary Fund (IMF) forecasts India’s nominal GDP for 2025 at $4.187 trillion, marginally ahead of Japan’s, validating Subrahmanyam’s announcement. India’s ascent in the global GDP rankings is not merely symbolic. It reflects rising production, expanding markets, and strengthening macroeconomic resilience, all of which influence policymaking, job creation, and global negotiations.
How did India get here? A quick economic retrospective
India’s economic journey has not been linear. Post-independence, India adopted a Soviet-style command economy with extensive state control, known as the Licence Raj. The 1991 balance of payments crisis catalyzed a sweeping liberalisation, ushering in market reforms, deregulation, and increased foreign investment.Today, India operates as a developing mixed economy—a hybrid of private enterprise and strategic public sector control. It maintains dominance in sectors such as railways, banking, and telecommunications, while simultaneously cultivating tech unicorns and attracting global manufacturers.Subrahmanyam pointed to favourable geopolitical dynamics and hinted at further economic reforms, stating that a second round of asset monetisation would be unveiled by August 2025.
India’s economic engine: Domestic consumption and global trade
Nearly 70% of India’s GDP is fuelled by domestic consumption, underlining the critical role of India’s burgeoning middle class. Complementing this is India’s strong performance in global trade. In 2022, India ranked 10th in imports and 8th in exports, according to WTO data. With the digital economy expanding and infrastructure development accelerating, India’s trade capacity is only expected to grow.In addition, India continues to lead in remittance inflows, topping the global chart with receiving remittances of over 100 billion for the third consecutive year, accounting for over 14% of global remittances, as per the World Bank.
What this means for students: Key economic indicators to watch
For students, understanding the nuances of India’s rise requires attention to a broader set of indicators beyond GDP:
These indices remind students that GDP alone does not tell the full story. For inclusive, sustainable growth, improvements in human capital, governance, innovation, and environmental health are essential.
India’s economic future: Third largest by 2028?
Subrahmanyam projected that if current momentum continues, “It is only the US, China, and Germany which are larger than India, and if we stick to what is being planned and what is being thought through, in 2.5-3 years, we will be the third largest economy.”IMF data supports this optimism, with projected growth at 6.5% in both 2024 and 2025, significantly above the global average of 3.3%. However, per capita income still lags behind developed economies. India’s per capita GDP is estimated to reach $2,880 in 2025, up from $1,438 in 2013–14—signifying progress, but also room for improvement.Challenges that persist: Growth with inequalityDespite impressive macroeconomic numbers, India continues to grapple with jobless growth, income disparity, and low workforce productivity. The Global Multidimensional Poverty Index (2024) reported that 234 million Indians still live in acute poverty. This paradox of rising GDP and persistent poverty is a critical subject of study for policy and economics students.Moreover, India’s 126th rank in the World Happiness Report and 108th in the Gender Inequality Index show that social development must catch up with financial growth.
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