New Delhi (Dec 31 2025) — India is now the fourth-largest economy in the world surpassing Japan with respect to nominal gross domestic product (GDP) as according to the Government of India announced in an economic report at the end of the year. With a GDP of $ 4.18 trillion, India now ranks just behind three countries: the United States, China, and Germany and is expected to take over Germany in order to be the third largest economy in the world within over the course of 2.5 to three years as per the official forecasts.

It is reported that the Press Information Bureau (PIB) release, which summarizes the most important economic reforms and indicators of performance for 2025, states that India’s success is a reflection of the sustained momentum of its economy. The real GDP of India grew by 8.2 percent during its second quarter in the fiscal year 2025-26 that was the country’s first six-quarter record and demonstrating resilience in the face of the uncertainty of global trade and complicated external circumstances.

The current ranking of India as the fourth largest economy is dependent on estimates of nominal GDP. The final confirmation of the ranking is expected in 2026, when comprehensive GDP data for the whole year are made available by international organizations such as the International Monetary Fund (IMF) and the World Bank. IMF projections that were released earlier suggest that India’s economy will be expected to be around USD 4.51 trillion by 2026 just slightly higher than Japan’s predicted GDP in the range of 4.46 trillion over the same time period.

Government Statement Highlights

In its announcement it was stated the fact that India’s economic growth is supported by a mix of high consumer demand in the country, reform driven actions, and a sustained increase in consumer spending. The PIB release says that the increase in GDP can be attributed to the strong performance of industries and services as well as favorable results in agriculture.

The Reserve Bank of India (RBI) has also updated its forecast of economic growth for upcoming fiscal year, increasing the growth forecast for real GDP from 6.8 percent to 7.3 percent. Furthermore, the major international organizations have revised their economic outlooks for India:

• The World Bank projects growth of 6.5 percent in 2026.
• Moody’s believes India to continue to be the fastest-growing of the G20 nations with 6.4 percent expansion in 2026. It will then grow to 6.5 percent in 2027.
• The International Monetary Fund has revised its growth forecasts to 6.6 percent by 2025 and 6.2 percent in 2026.
• The Organisation for Economic Co-operation and Development (OECD) estimates an increase of 6.7 percent by 2025 and 6.2 percent by 2026.
• Standard & Poor’s and the Asian Development Bank are also anticipating sustained growth aided with macroeconomic stability.
• Fitch Ratings increased its FY26 forecast to 7.4 percent.

Drivers of Growth

Officials have highlighted the fact that the performance of the economy in 2025 is mostly driven by domestic demand with private consumption becoming the major driver of growth. The investment in infrastructure manufacturing, infrastructure, and services and supported by policies such as tax reforms such as the Goods and Services Tax (GST) rationalization and reforms to corporate taxation have boosted economic activity.

Alongside the robust growth in consumption and a strong economy, the economic report of the government revealed improvement in macro indicators. Inflation has slowed dramatically creating a favorable environment for investment, without the pressure of price. The unemployment rate has fallen to lows of a month which has led to improved labor market conditions.

Trade performance and exports have also seen positive developments and services exports have played an important role in reducing the current deficit in the account. Transfers to Indian expatriates saw a noticeable rise, while international direct investment (FDI) flow increased by a significant increase in gross FDI nearly 19.4 percent during the first quarter of fiscal year. Net FDI increased by more than doubling in the same time frame.

Global Economic Context

The new rankings of India highlight broader changes to the world’s economy in which emerging markets contribute an increasing share of global GDP. The rapid growth of India’s economy contrasts with the relatively slow growth in many advanced economies, highlighting the advantages of the growing population of young people and urbanization.

Yet, the country’s GDP per capita is significantly lower than the advanced economies, such as Germany and the other Organisation for Economic Co-operation and Development (OECD) members. Although nominal GDP ranking give an indication of size and per measures of per capita are essential to measuring living standards and the structural progress. Economic institutions and independent analysts insist on the significance of inclusive growth and productivity improvements to ensure that the benefits of expansion are felt by more people.

Projections for Surpassing Germany

According to estimates, projections in the official estimates point to India’s nominal GDP at around USD 7.3 trillion in 2030, which is enough to overtake Germany as well as secure the third largest economic position in the world. This estimate is contingent upon the continued momentum of growth, steady investment flows, stable inflation and the effective implementation of policy.

Economists point out that even though the forecasts are based on external factors such as geopolitical developments as well as global trade trends and financial markets, the trend is a reflection of structurally strong demand and stability of the macroeconomic. The continued focus of policy on infrastructure, digitalisation and accessibility to business and the expansion of trade are likely to impact results over the next few years.

Broader Implications

The rise of India to fourth largest economy and the possibility of catching Germany have implications on global economic governance and global market dynamics. As the economic power of India increases and its influence grows, so too does its place in international organizations, trade negotiations and the flow of investment. An increase in GDP could increase India’s influence in multilateral forums, and may be arousing attention from investors from abroad looking for exposure to markets that are growing rapidly.

Economic policymakers and government officials have emphasized that improved economic conditions, accompanied by strategic reforms are crucial to sustaining growth. The growth that was made in 2025 is viewed as a benchmark, strengthening India’s standing among the major economies around the world as the country moves toward greater production levels along with global integration.

This announcement marks a significant moment in the history of India’s economy which reflects sustained growth amid global economic challenges, and preparing the country to experience more growth over the next years.