With real GDP touching $4.3 trillion, the Indian economy leaped from 'Fragile Five' to the fastest fifth in just a decade. But that's no reason to be excited about.
What could instead offer buttery chunks of happiness is that, we are trailing closely behind Japan's $4.4 trillion and can surpass it as the world's fourth-largest economy any moment now.
Ironically though, this milestone isn't entirely because we are pulling the economy by its bootstraps, but because luck is playing a critical role.
Japan is aging poorly and its growth has been stagnant for decades. For instance, in 2015, its GDP stood at $4.4 trillion and is still stuck at $4.4 trillion in 2025. In contrast, India marched purposefully with its GDP rising from a little over $2 trillion in 2014 to $4.3 trillion now.
India's growth is slowing down too as we speak, but even if we manage to sustain the current run-rate of 6%-6.5%, the prospect of overtaking Japan seems to be written in the stars.
For decades, Japan has endured complete economic stagnation barely adding $200 billion worth of output, or less than 0.25% every year from 2000-2019. Its economy contracted 1.3% in the last 10 years, according to IMF's World Economic Outlook 2024.
Historically touted as an economic miracle, Japan rose from the ashes of World War II to emerge as the world's second-largest economy after the US. However, following the financial bubble that began in 1990, it collapsed into the sickbed and remained there for over 30 years now.
Until 2010, it reigned as the world's second-largest, only to be overtaken by China. Finally in 2023, when its economy contracted further, it slipped into the fourth spot falling behind Germany.
In contrast, the Indian economy made a substantial splash during the same period.
Though we got off to a ropy start after Independence, taking as much as six decades to clock our first trillion in 2007, the next milestones were relatively easy. It took just seven years each to double from $1 trillion to $2 trillion in 2014 and to $3 trillion in 2021. Lastly, the Indian economy capped off the next trillion in an even shorter timeframe of four years, notwithstanding black swan events like the Covid pandemic and the Russia-Ukraine war.
With undisguised delight, the government took the applause for outpacing all the nations in the G7, the G20, and the BRICS by more than doubling its size.
According to the IMF, India has doubled its GDP in the past decade, and by growing by 105%, it emerged as the fastest-growing large economy in the world, ahead of the US and China. In fact, it bounced like a spring in the foot during the last decade, overtaking both the UK and France.
In 2015, France's GDP stood at $2.4 trillion, ahead of India's $2.1 trillion GDP. But by 2025, France's GDP stood at $3.3 trillion, while India led the happy way forward, growth it approximately 30% bigger than the French economy.
Likewise, the UK was ahead of India at $2.9 trillion in 2015, but trailed behind with a GDP of $3.7 trillion by 2025.
Moving forward, Asia's third-largest economy is about to mount its white horse and is expected to add $1 trillion every 1.5 years. And as the IMF noted, with the current growth trajectory, India could become $10 trillion by 2032. And should the average growth rate continue and if as they say, one good turn deserves another, India will likely surpass Germany's $4.9 trillion economy -- currently, the world's third largest -- by 2027. Fancy that!
It's likely to emerge as the third largest with a GDP of $5.7 trillion by 2027 and $6.3 trillion by 2029.
Critics, however, warn against betting on such a goal rush and counter that these projections are akin to tossing a coin to see if it'll come down as a head or a tail.
For, both the Japanese and German economies were powered by industrialization. Like Japan in the 1960s-1980s, Germany too roared with its manufacturing prowess, dominating global markets for high-end products like luxury cars and industrial machinery and thrived on exports. India, on the other hand, acutely lacks manufacturing muscle and also needs to get a bent on exports.
Also, despite its impressive growth rates, India is nautical miles behind China. In 2015, its economy stood at $11.1 trillion, more than five times bigger than the Indian economy and the gap has widened since. That said, Chinese economy too has slowed considerably and between 2015 and 2025, when it grew at 77%, slower than India's 105%.
All said, we can warm up to the theme that India will continue to be the fastest-growing major economy in the coming years as well, as acknowledged by the IMF. Its projected 6.5% growth rate in both FY25 and FY26 is higher than all the top-10 world economies. Still, several factors need attention.
For one, the IMF has called for deeper structural reforms, stressing the need for fiscal consolidation, labour market improvements, and trade policy adjustments to boost long-term economic growth. In its latest Article IV Consultation report for 2024, while commending India's economic resilience, it flagged potential risks stemming from geopolitical tensions, inflation volatility, and weak private consumption.
