{"id":44108,"date":"2025-05-26T21:12:25","date_gmt":"2025-05-26T15:42:25","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=44108"},"modified":"2025-05-26T21:12:37","modified_gmt":"2025-05-26T15:42:37","slug":"india-4th-largest-economy","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/26-05-2025\/india-4th-largest-economy","title":{"rendered":"India Becomes the World&#8217;s 4th Largest Economy"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Indian Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Recently, NITI Aayog CEO B.V.R. Subrahmanyam informed that <strong>India has surpassed Japan<\/strong> to become the <strong>world\u2019s fourth-largest economy <\/strong>(nominal GDP), and poised to displace <strong>Germany <\/strong>in the next 2.5 to 3 years.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>India\u2019s Economic Growth<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India\u2019s nominal GDP has <strong>now reached $4.19 trillion<\/strong>, overtaking Japan\u2019s estimated $4.18 trillion.<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img data-dominant-color=\"dfdfde\" data-has-transparency=\"false\" loading=\"lazy\" decoding=\"async\" width=\"600\" height=\"400\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/05\/india-powers-past-japan-in-the-world.png\" alt=\"india powers past japan in the world\" class=\"not-transparent wp-image-44109\" style=\"--dominant-color: #dfdfde; width:454px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/05\/india-powers-past-japan-in-the-world.png 600w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/05\/india-powers-past-japan-in-the-world-300x200.png 300w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><\/figure>\n<\/div>\n\n\n<ul class=\"wp-block-list\">\n<li>The <strong>IMF\u2019s World Economic Outlook<\/strong> report predicts that India aims to <strong>continue to be the fastest-growing major economy<\/strong>, with a projected growth rate of <strong>6.2% in 2025 and 6.3% in 2026.&nbsp;<\/strong>\n<ul class=\"wp-block-list\">\n<li>Over the past decade, India has<strong> doubled its GDP from $2.1 trillion in 2015<\/strong> to its current level.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Becoming the Third-Largest Economy<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The IMF projects that India will become the <strong>third-largest economy by 2028<\/strong>, with an expected GDP of <strong>$5.5 trillion<\/strong> by overtaking <strong>Germany<\/strong>.\n<ul class=\"wp-block-list\">\n<li>Germany\u2019s projected GDP growth: <strong>0%<\/strong> (2025), and<strong> 0.9%<\/strong> (2026) (due to ongoing global trade tensions).<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Determinants of India&#8217;s Economic Growth<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Expanding Domestic Consumption:<\/strong> India\u2019s economic growth is largely fueled by private consumption, particularly in rural areas.\n<ul class=\"wp-block-list\">\n<li>Also, the urbanization and lifestyle shifts have led to an increase in consumption-led growth. India\u2019s urban population is <strong>expected to touch 600 million by 2030.<\/strong><\/li>\n\n\n\n<li>The demographic dividend is a unique edge\u2014India\u2019s median age is just 29 years, offering a productive workforce for the coming decades.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Infrastructure Development &amp; Digital Transformation:<\/strong> India has invested heavily in modernizing infrastructure, including transportation, energy, and digital connectivity.\n<ul class=\"wp-block-list\">\n<li><strong>For example:<\/strong> India\u2019s Digital Public Infrastructure (DPI), emergence of India as a <strong>global startup hub <\/strong>&amp; boost in the IT sector enhancing innovative driven growth.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Manufacturing &amp; Services Sector Growth:<\/strong> India\u2019s manufacturing sector has seen significant growth due to initiatives like <strong>Make in India<\/strong> and <strong>Production-Linked Incentive (PLI) schemes.<\/strong>\n<ul class=\"wp-block-list\">\n<li>Additionally, the services sector, particularly IT and financial services, continues to be a major contributor to GDP.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>External and Global Realignment:<\/strong> Strategic initiatives like \u201cChina Plus One\u201d and Supply Chain Resilience Initiative (SCRI) are leading to increased FDI inflows into India.\n<ul class=\"wp-block-list\">\n<li>Global firms are diversifying their manufacturing bases, turning to India as an alternative to China amid geopolitical tensions <strong>For example: <\/strong>Apple has investors in India for manufacturing units.&nbsp;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Reform-Driven Growth: <\/strong>Introduction of Goods and Services Tax (GST) has created a unified domestic market, Insolvency and Bankruptcy Code (IBC) has improved the ease of doing business, Corporate tax cuts &amp; initiatives like PM Gati Shakti, National Infrastructure Pipeline (NIP), and Atmanirbhar Bharat&nbsp; are boosting capital formation.&nbsp;<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#ebecf0\"><tbody><tr><td><strong>Additional Information<\/strong><br>&#8211; <strong>Real GDP:<\/strong> It measures the total value of goods and services produced in an economy, <strong>adjusted for inflation.<\/strong>&nbsp;<br>1. It reflects the actual growth in production by using constant prices from a base year.<br>&#8211; <strong>Nominal GDP:<\/strong> It measures the total value of goods and services produced at current market prices,<strong> without adjusting for inflation.<\/strong><br>1. It means that if prices rise due to inflation, Nominal GDP may appear higher even if actual production remains unchanged.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Challenges and Concerns<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Global Geopolitical Uncertainty:<\/strong> India\u2019s economy is deeply connected to global trade, and geopolitical tensions \u2014 including conflicts, trade restrictions, and supply chain disruptions \u2014 pose risks to its growth.\n<ul class=\"wp-block-list\">\n<li>The <strong>Economic Survey 2025<\/strong> highlights that ongoing conflicts and trade policy risks could create vulnerabilities for India\u2019s economic stability.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Inflation and Price Volatility: <\/strong>While inflationary pressures have eased, services inflation remains persistent.\n<ul class=\"wp-block-list\">\n<li>The rising cost of essential commodities, including fuel and food, continues to be a concern for policymakers.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Employment and Workforce Challenges:<\/strong> India\u2019s workforce faces disruptions due to automation and AI.\n<ul class=\"wp-block-list\">\n<li>The need for upskilling and reskilling is critical to ensure that workers remain competitive in a rapidly evolving job market.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Trade Deficit and Export Challenges:<\/strong> India\u2019s current account deficit has been reduced to 1% of GDP, but weak global demand has impacted exports.\n<ul class=\"wp-block-list\">\n<li>The government is focusing on diversifying trade partnerships to mitigate risks associated with declining exports.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Infrastructure and Investment Needs:<\/strong> India\u2019s <strong>Capital Expenditure (Capex) to GDP ratio<\/strong> has surged to 3.3%, reflecting strong investment in infrastructure.\n<ul class=\"wp-block-list\">\n<li>However, sustained investment is required to modernize transportation, energy, and digital connectivity.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Way Forward<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Diversify its trade partnerships to reduce dependency on volatile global markets.<\/li>\n\n\n\n<li>Strengthen domestic manufacturing through various initiatives and schemes.<\/li>\n\n\n\n<li>Invest in digital transformation to enhance financial inclusion and governance.<\/li>\n\n\n\n<li>Focus on sustainable economic policies that balance growth with environmental concerns.<\/li>\n<\/ul>\n\n\n\n<p><a href=\"https:\/\/www.newsonair.gov.in\/india-becomes-worlds-4th-largest-economy-surpasses-japan-niti-aayog\/\" rel=\"nofollow noopener\" target=\"_blank\">Source: News on AIR<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<h3><strong>Context<\/strong><\/h3>\n<li class=\"ms-5\">Recently, NITI Aayog CEO B.V.R. Subrahmanyam informed that India has surpassed Japan to become the world\u2019s fourth-largest economy (nominal GDP), and poised to displace Germany in the next 2.5 to 3 years.<\/li>\n<p><\/p>\n<h3><strong>Becoming the Third-Largest Economy<\/strong><\/h3>\n<li class=\"ms-5\">The IMF projects that India will become the third-largest economy by 2028, with an expected GDP of $5.5 trillion by overtaking Germany.<\/li>\n<li class=\"ms-5\">Germany\u2019s projected GDP growth: 0% (2025), and 0.9% (2026) (due to ongoing global trade tensions).<\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/26-05-2025\/india-4th-largest-economy\" class=\"btn btn-primary btn-sm float-end\">Read\u00a0More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-44108","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/44108","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=44108"}],"version-history":[{"count":4,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/44108\/revisions"}],"predecessor-version":[{"id":44135,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/44108\/revisions\/44135"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=44108"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=44108"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=44108"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}