To go from being the 10th largest economy in 2014 to fourth largest in 11 years is no mean feat. India’s Gross Domestic Product (GDP) has almost doubled during this time frame. According to International Monetary Fund (IMF) data, in 2014, India’s GDP was estimated at $2.0 trillion which went up to an estimated $3.9 trillion in 2024. This represents a significant increase of roughly 1.9 trillion over the decade. 

The April edition of IMF’s World Economic Outlook report said that India’s nominal GDP for FY26 is expected to reach around $4,187.017 billion, which is slightly higher than that of Japan which is estimated at $4,186.431 billion. This will take India from its current fifth position to fourth place by the end of 2025. The report also said that India’s economy is expected to grow by 6.2 per cent in 2025 and 6.3 per cent in 2026, maintaining a solid lead over global and regional peers. 

Meanwhile, according to data released by the National Statistics Office (NSO) on May 30, India’s economic growth accelerated to 7.4 per cent, beating estimates, but it couldn’t save the economy from posting its slowest growth since Covid-era in FY25. The full-year growth rate is estimated to have slowed to a four-year low of 6.5 per cent for FY25, slowing down sharply from the 9.2 per cent growth recorded in FY24. 

That is not to say that India’s economic growth is now moving towards a downfall. Analysts have still vouched that the country will retain its title as the fastest-growing major economy in the world. For FY26, economists continue to expect real GDP to grow by 6.5 per cent, but with risks on the downside owing to external headwinds. Nevertheless, improving domestic consumption is likely to support industrial activity. 

While that’s almost a pretty picture to look at, are all Indians growing with India? There are still too many questions that need to be answered – How has India achieved this remarkable growth? Can this momentum be sustained? If India’s economy is growing so fast, why does the average income per person (per capita GDP) still seem low? And what’s the road ahead for India to become a $5 trillion economy, and the world’s third largest?

What has worked for India?

What has been and what has worked for India is a combination of structural forms, strategic investments and favourable global dynamics. According to analysts, prudent fiscal and monetary policies have provided the foundation for a stable GDP growth, which going forward as well (for FY26), is expected in the range of 6.2- 6.5 per cent. India’s expanding service sector, tech industry, and domestic demand are also major drivers of the economy.

Key reforms such as the implementation of the Goods and Services Tax (GST) in 2017 and corporate tax cuts in 2019 have streamlined the business environment, attracting investments and boosting economic activity.

The boom in manufacturing and construction sectors have been significant contributors to recent GDP growth, reflecting increased industrial activity and infrastructure development. 

Further, government initiatives like ‘Make in India‘ and substantial public capital expenditure have spurred industrial growth and infrastructure development, enhancing economic resilience.

And lastly, geopolitical shifts, including global supply-chain realignments due to the US-China trade tensions, have positioned India as an attractive destination for investment and manufacturing.

While these and many more factors are working in favour of India’s economic growth, Manoranjan Sharma, Chief Economist at Infomerics Ratings, said that it is important to make the process and pattern of economic growth more broad-based and equitable. “India has become the 4th largest economy and we are on track to be the 3rd largest economy in the span of three years. While this development is greatly welcome, we must realise that any cross-country comparison is fraught with serious conceptual, methodological and operational issues. For example, this does not consider the per capita income, the level of poverty and unemployment, regional imbalances and the skew in the distribution of income and wealth,” he told FinancialExpress.com. 

How inclusive is this growth?

While we celebrated this feat already, the point of contention is…Is this growth inclusive? Agreed, in nominal GDP terms, the Indian economy has made giant strides in overtaking some of the biggest economies, and India does get the credit for growing at around 6 per cent to 7 per cent on an average since 2004. But with the highest population in the world, its per capita GDP remains abysmally low. Furthermore, the country does not even rank in the top 100 when it comes to GDP per capita or even in PPP rankings. 

Before we move on to India’s rank in terms of PPP and GDP per capita, it’s important to clarify the difference between the two. To understand GDP per person, think of it as: How much money, on average, each person in a country makes in a year. It tells how rich or poor a country is by dividing the country’s total income (GDP) by the number of people. Now, PPP (Purchasing Power Parity) tells how much stuff one can actually buy with their money in their country.

India was third largest economy and nobody celebrated

Not to dull the enthusiasm, but if we use the PPP metric, India was the third largest economy long before the current government took charge. In PPP terms, the rankings were: China (approximately $29 trillion), United States (approximately $24 trillion) and India (approximately $11 trillion). India overtook the United Kingdom in 2021, however, the country’s nominal per capita GDP was $2,250 and UK’s per capita GDP was $46,115, which was more than 20 times India’s. In simple words, even as India’s overall nominal GDP is progressively higher than UK’s, per capita incomes in the UK have gone up by over $8,000 between 2021 and 2025 while India’s has gone up by around $600. 

Now coming back to Niti Aayog CEO BVR Subrahmanyam’s statement on India being the fourth largest economy surpassing Japan… With a nominal GDP of $4.187 trillion, India is set to move ahead of Japan’s GDP of $4.186 trillion by the end of 2025. However, there is a vast gap between Japan’s per capita GDP of $33,900 and India’s per capita GDP of $2,880, per data by the IMF. This sets India as a low-middle-income economy and a developing economy. Even so, India’s long-term economic potential remains strong and globally significant. Japan, on the other hand, represents a developed and affluent society. While challenges like an aging population persist, Japan’s innovation and global business footprint keep it in the world’s top economic tier. 

Even when measured by per capita GDP adjusted for purchasing power parity (PPP), India remains significantly below the global average. If the world average is set at 100, India stands at just 40 per cent of that level.

Now in terms of population, India is currently the most populous country in the world which currently stands at 1.4 billion. This large population dilutes the potential benefits the country might expect from a doubling of its GDP.

Also, informal employment (around 90 per cent of workforce) and low female workforce participation (26 per cent vs global 47 per cent) limit per capita gains. However, per the IMF data, India has been consistently lowering its unemployment rate. From 8.9 per cent in 2018, unemployment nearly halved to 4.9 per cent in 2025. 

As per the first-ever job survey conducted by the Ministry of Statistics and Programme Implementation (MOSPI) , it was revealed that India’s monthly unemployment rate stood at 5.1 per cent in April 2025. 

What’s the way forward?

India, as does all other countries, require a lot of work towards inclusive growth. Wheels of the structural engine will require to be oiled by keeping the development and reform agenda on track. Measures like skill development, employment generation, financial inclusion, technological advancement, among others will be the vital objective for the administration in the rest of its term. 

Manoranjan Sharma said, “The government can play a catalytic role in addressing economic inequality and ensuring sustainable growth. Today, governments must focus on broad-basing economic growth to ensure it benefits all sections and regions of society. Strengthening the MSME sector, creating an enabling ecosystem for inclusive development, and leveraging the role of banks and financial institutions as catalysts for transformation are essential. These elements are key to addressing inequality and fostering sustainable, equitable growth.”

To conclude, India’s economic journey over the past decade has been undeniably impressive. Yet, beneath this lie deeper questions about inclusivity, equity, and long-term sustainability. For India to truly emerge as an economic superpower, growth must be broad-based—reaching beyond metros, beyond the formal sector, and beyond the top percentile of income earners. The path to a $5 trillion economy is not just about bigger numbers; it’s about ensuring those numbers translate into better lives for all Indians.