NEW YORK, December 31, 2025, 05:42 ET
- India’s economy is now valued at $4.18 trillion, the government said, overtaking Japan.
- New Delhi said it is positioned to displace Germany from third place within about three years.
- Officials cited 8.2% real GDP growth in the latest quarter and easing inflation as support for the milestone.
India has overtaken Japan to become the world’s fourth-largest economy, the government said, putting gross domestic product at $4.18 trillion. The year-end update said India is on track to displace Germany from third place within 2.5 to 3 years. 1
The claim came in a year-end economic review that said continued growth reflects India’s resilience amid persistent global trade uncertainties.
In an explainer published by the government’s Press Information Bureau, officials said the economy is in a Goldilocks phase—high growth and low inflation—and pointed to softer consumer prices and falling unemployment. 2
India’s inflation-adjusted, or real, GDP rose 8.2% in the second quarter of the 2025-26 fiscal year, up from 7.8% in the first quarter and 7.4% in the previous quarter, the government said. Private consumption was a key driver, it added.
Gross domestic product measures the value of goods and services produced. Rankings based on nominal GDP in U.S. dollars can move with exchange rates, while real GDP strips out inflation to show underlying growth.
The government said consumer price index (CPI) inflation, a gauge of household prices, fell to 0.71% in November from 4.26% in January. It also said the unemployment rate eased to 4.7% in November from 5.2% in October.
It said the Reserve Bank of India raised its FY2025-26 growth forecast to 7.3% from 6.8%, citing firm domestic demand and benign inflation.
India’s GDP was valued at $4.18 trillion, the government said, leaving it behind only the United States and China. It projected output could reach $7.3 trillion by 2030, a pace it says would allow it to overtake Germany.
A Reuters report carried by The Business Times cited IMF projections putting India’s economy at $4.51 trillion in 2026, compared with Japan’s $4.46 trillion, and said official confirmation depends on final annual GDP figures due in 2026. 3
The same report said India’s GDP per capita was $2,694 in 2024, far below Japan’s $32,487 and Germany’s $56,103, highlighting the gap in average living standards. It added that more than a quarter of India’s roughly 1.4 billion people are aged 10 to 26, sharpening the focus on job creation.
Investors have also watched signals from markets and the currency. The rupee ended 2025 at 89.87 per dollar, down 4.72% for the year, as record equity outflows weighed, Reuters reported. “The rupee’s performance this year was largely a capital-flow story,” said Gaura Sen Gupta, an economist at IDFC First Bank. 4
