India, the world\u2019s fastest-growing large economy for four years in a row, released data on Friday showing that it expanded at a rate of 7.5 percent last year, driven in part by strength in manufacturing.<\/p>\n
Many economists, and India\u2019s government<\/a>, had expected India to become the world\u2019s fourth-largest economy in 2025, overtaking Japan in size. Instead, with the Indian rupee weak against the dollar and Japan\u2019s yen relatively strong, India\u2019s economy stayed a step behind when measured in dollar terms.<\/p>\n But in terms of growth, India far outperformed Japan, which grew only 1.1 percent in 2025. The three largest economies \u2014 the United States, China and Germany \u2014 all grew more slowly than India last year.<\/p>\n India became the world\u2019s fifth-largest economy four years ago, pushing aside Britain, its former colonial ruler. The International Monetary Fund has projected that India will nudge past Japan in 2026.<\/p>\n The strong growth last year underscores India\u2019s place as one of the world\u2019s most consequential centers of economic gravity, despite breaking every rule about how countries are supposed to modernize. Its rise up the league table of economies has given it geopolitical clout and drawn interest from investors. Yet the shape of its progress is unique. With India\u2019s economic power growing even faster than its population \u2014 now more than 1.4 billion people, larger than any other country\u2019s \u2014 India is on a course all its own.<\/p>\n The country\u2019s thousands of small businesses hire most of its workers, but an increasing share of growth has come from its biggest companies. Dynastic family firms play an outsize role at every scale, from conglomerates like Mukesh Ambani\u2019s Reliance Group to industry-specific companies.<\/p>\n Sanjiv Bajaj, a scion of a 100-year-old family business with roots in the automotive sector, has had a ringside view of India\u2019s growth. Mr. Bajaj, 56, split off the Bajaj group\u2019s financial services operation from Bajaj Auto in 2007. Bajaj Finserv started with $550 million under management and now controls $53 billion. Its own market value has grown 377 times over.<\/p>\n Much of the company\u2019s success can be traced to India\u2019s policies to modernize technology. In the past decade, the government has pushed biometric IDs and digital payments, pulling a majority of India\u2019s adults into the banking system. India\u2019s own digital payments system<\/a> now processes 20 billion transactions a month. Most amounts are tiny, Mr. Bajaj said, but the sheer size of the country\u2019s population means that even small shifts in behavior turn into tremendous moneymaking opportunities.<\/p>\n All of that data, Mr. Bajaj said, \u201callows us to look at every small shop owner and see his inflows and outflows every day.\u201d His company can now make lending decisions at an enormous scale, bringing millions of Indians into the formal credit system, he said.<\/p>\n Among the world\u2019s economies, the United States and China are way ahead in terms of size, ahead of Germany, Japan and India, all in a tight cluster, by about four to six times.<\/p>\n India has been holding tight to its position as the fastest-growing large economy since 2021. With annual growth of more than 6 or 7 percent, it doubles in size every decade, while Germany, Japan and most other rich countries struggle to hit yearly growth of 2 percent.<\/p>\n Germany and Japan have over decades become manufacturing powerhouses that have lifted their populations out of post-World War II poverty.<\/p>\n India is still poor. The average Japanese income is 12 times the Indian average. The average German\u2019s is 21 times as great. Indians on average have incomes of only about $2,900 a year, and the country\u2019s top-heavy economy means most of its citizens make far less.<\/p>\n The contrasts can be shocking. In India, billions of dollars are being invested to build data centers<\/a>, and airports<\/a> are sprouting everywhere, even as about 800 million people depend on the government for free sacks of grain<\/a>.<\/p>\n India\u2019s inequality leaves most of a billion people in a state of subsistence, and it hobbles the country as a whole. Social divisions deepen, it becomes harder to fund public health and education \u2014 and it gets much tougher for consumer-facing companies to turn a profit.<\/p>\n But for businesses like Bajaj Finserv, Mr. Bajaj estimated, the better-off 400 million Indians are a great opportunity in their own right. No other country except China has so large a group of consumers, he said.<\/p>\n Narendra Modi, India\u2019s prime minister since 2014, said he intended to transform India into a fully developed country by 2047, the 100th anniversary of its independence. That won\u2019t happen unless the country\u2019s growth speeds up to the kind of pace China achieved earlier this century.<\/p>\n