Key Points:
- India overtakes Japan economy, becoming the world’s fourth-largest with a $4.18T GDP.
- Strong private consumption and credit flows drive growth.
- Global agencies raise India’s growth forecasts, citing resilience and momentum.
India overtakes Japan economy to become the world’s fourth-largest economy with a GDP of $4.18 trillion, the government said Tuesday, driven by strong domestic demand and faster-than-expected growth in 2025-26.
Growth Pushes India Past Japan
India’s economy expanded 8.2 per cent in the second quarter of fiscal 2025-26, marking a six-quarter high and lifting the country past Japan in global rankings, according to a government release issued Tuesday.
The release said India’s gross domestic product now stands at $4.18 trillion, placing it behind only the United States and China and ahead of Japan. Germany remains the third-largest economy.
“With GDP valued at $4.18 trillion, India overtakes Japan economy to become the world’s fourth-largest economy,” the government said, adding that the country is on track to overtake Germany within the next 2.5 to three years.
India’s growth in the second quarter accelerated from 7.8 per cent in the first quarter and 7.4 per cent in the fourth quarter of the previous fiscal year. Officials attributed the performance to resilient domestic demand despite ongoing global trade uncertainty.
The United States remains the world’s largest economy, followed by China, the release said.
Consumption, Credit Drive Momentum
The government said private consumption was the primary driver of growth, supported by steady credit flows and improving financial conditions. Urban demand strengthened further during the quarter, helping offset external pressures.
“Domestic drivers, led by robust private consumption, played a central role in supporting this expansion,” the release said. It described financial conditions as “benign,” with strong lending to the commercial sector.
Inflation has stayed below the lower end of the government’s tolerance band, while unemployment continues on a downward trend, the statement said. Export performance has also improved, adding support to overall growth.
Economists say India’s relative insulation from global shocks has helped sustain momentum. The country has benefited from a large domestic market, rising household spending and continued public investment.
The government said the latest data reflect the economy’s resilience and the impact of reforms implemented in recent years. It also reiterated its long-term goal of achieving high middle-income status by 2047, the centenary of India’s independence.
Global Agencies Lift Forecasts
International agencies have echoed the government’s optimism, raising or maintaining strong growth projections for India over the next two years.
The World Bank has projected India’s growth at 6.5 per cent in 2026. Moody’s Ratings said India is expected to remain the fastest-growing major G20 economy, forecasting growth of 6.4 per cent in 2026 and 6.5 per cent in 2027.
“India’s growth outlook remains strong compared with global peers,” Moody’s said in its latest assessment, citing resilient consumption and policy stability.
The International Monetary Fund has raised its projections to 6.6 per cent for 2025 and 6.2 per cent for 2026. The Organisation for Economic Co-operation and Development forecasts 6.7 per cent growth in 2025 and 6.2 per cent in 2026.
S&P Global Ratings expects growth of 6.5 per cent in the current fiscal year and 6.7 per cent in the next. The Asian Development Bank has lifted its 2025 forecast to 7.2 per cent, while Fitch Ratings raised its fiscal 2025-26 projection to 7.4 per cent, citing stronger consumer demand.
The government said these forecasts underscore India overtakes Japan economy, highlighting its position among the world’s fastest-growing major economies and its prospects for sustained expansion in the coming decade.
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