India achieved a monumental milestone by overtaking Japan to become the world’s fourth-largest economy, with a nominal GDP of $4.187 trillion. Announced by B V R Subrahmanyam, CEO of NITI Aayog, during a press conference following the 10th Governing Council meeting, this achievement underscores India’s growing economic prowess and its shifting role in global dynamics. For competitive exam aspirants, understanding this development and its implications is crucial for mastering current affairs and economic concepts.
Understanding India’s Economic Ascent
From Licence Raj to Global Power
India’s journey to becoming the fourth-largest economy reflects decades of transformation. Post-independence, India operated under the Licence Raj, a system of heavy state control. The 1991 balance of payments crisis triggered sweeping economic liberalisation, opening doors to market reforms, deregulation, and foreign investment. Today, India’s mixed economy balances private enterprise with strategic public sector dominance in areas like railways, banking, and telecommunications, while fostering tech unicorns and global manufacturing hubs. Subrahmanyam highlighted plans for a second round of asset monetisation by August 2025, signaling further reforms to sustain this growth.
Key Drivers of India’s Economic Growth
Domestic Consumption and Global Trade
Nearly 70% of India’s GDP is driven by domestic consumption, fueled by a growing middle class. India’s robust performance in global trade also plays a pivotal role, with the country ranking 10th in imports and 8th in exports globally in 2022, according to WTO data. The digital economy and infrastructure development are further boosting trade capacity. Additionally, India leads in remittance inflows, receiving over $100 billion annually for three consecutive years, accounting for 14% of global remittances, as per World Bank data.
India’s Global Rankings: A Snapshot
| Index | India’s Rank | Significance |
|---|---|---|
| Global Firepower Index 2025 | 4th | Reflects strong military capabilities alongside economic growth |
| Global Innovation Index 2024 | 39th out of 133 | Highlights potential for R&D and technological advancements |
| Human Development Index 2023–24 | 134th out of 193 | Indicates need for progress in education, health, and living standards |
| Global Hunger Index 2024 | 105th out of 127 | Points to challenges in addressing inequality and undernutrition |
| World Competitiveness Index 2024 | 39th | Measures economic value creation through reforms |
| World Press Freedom Index 2024 | 162nd out of 180 | Highlights concerns over media independence |
Challenges and Opportunities Ahead
Balancing Growth with Inclusivity
While India’s GDP growth is impressive, challenges like jobless growth, income disparity, and low workforce productivity persist. The Global Multidimensional Poverty Index 2024 notes that 234 million Indians still live in acute poverty. Rankings in the World Happiness Report (126th) and Gender Inequality Index (108th) underscore the need for social development to match economic progress. For aspirants, these issues highlight the importance of understanding the interplay between economic growth and social equity.
Future Outlook: Aiming for Third Place
Projections and Per Capita Income
Subrahmanyam expressed optimism, stating that India could become the third-largest economy by 2028, trailing only the US and China. The IMF projects India’s growth at 6.5% for 2024 and 2025, far exceeding the global average of 3.3%. However, India’s per capita GDP of $2,880 in 2025 indicates a gap compared to developed economies, emphasizing the need for inclusive growth policies.
Relevance for Competitive Exams
A Must-Know Topic
For students preparing for exams like UPSC, SSC, and Banking, India’s economic milestone is a key current affairs topic. Questions may focus on GDP, economic reforms, global rankings, or challenges like poverty and inequality. Understanding related indices, such as the Global Innovation Index or Human Development Index, is crucial for both prelims and mains. The topic also ties into broader themes like sustainable development, global trade, and economic policy, making it essential for aspirants.
Key Highlights of India’s Economic Milestone
- Achievement: India surpassed Japan to become the world’s fourth-largest economy with a GDP of $4.187 trillion.
- Key Figure: B V R Subrahmanyam, CEO of NITI Aayog.
- Drivers: Domestic consumption (70% of GDP), global trade (8th in exports, 10th in imports), and remittances ($100 billion annually).
- Challenges: Jobless growth, poverty (234 million in acute poverty), and low rankings in HDI (134th) and Gender Inequality Index (108th).
- Future Projection: India aims to be the third-largest economy by 2028.