A top Indian official claims the country has overtaken Japan to become the world’s fourth-largest economy, in what would be a significant symbolic milestone. But while the comment has been seized upon with glee in India, experts say the celebrations may be premature.
The claim came from BVR Subrahmanyam, chief of the Indian government’s public policy think-tank Niti Aayog. He told a televised press briefing on Sunday: “We are the fourth largest economy as I speak. We are a $4tn economy as I speak, and this is not my data. This is IMF data,” he said. “India today is larger than Japan.”
He went on to claim that India was on course to displace Germany as the third largest economy, placing it behind only the US and China, in about three years.
“It is only the US, China and Germany which are larger than India and if we stick to what is being planned and what is being thought through, in 2.5-3 years, we will be the third largest economy,” Subrahmanyam said.
Many reports in India have taken the claims at face value, but analysts who spoke to The Independent urged caution, pointing out that they appear to be based on projections from the IMF, not current data. Even if this milestone is reached, they say, it should not distract from the fact that there are deep-rooted socioeconomic issues and gaping disparities in the country.
India, which aspires to be a superpower by 2050, is projected by the IMF to overtake Japan in 2026 and Germany the following year. Subrahmanyam’s claim that it is already the fourth-largest economy isn’t accurate, however, at least according to the body’ current figures. For now, India remains the world’s fifth-largest economy by GDP.
The day after Subrahmanyam’s press briefing, economist and Niti Aayog member Arvind Virmani walked back the statement and clarified that India was on course to become the fourth-largest economy in the financial year 2025-26.
“Many have estimated that when the 2025 data is released, it will show that India’s GDP has surpassed that of Japan, placing us in the fourth position globally,” he said. “So, we can say that by 2025, India will become the fourth-largest economy, and by 2027 or 2028, we will become the third-largest country by GDP.”
According to the IMF World Economic Outlook 2025, India’s GDP, a metric for determining the value of a nation’s economy, is around $3.909tn as compared to Japan’s $4.026tn.
Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at investment bank Natixis in Hong Kong, tells The Independent that IMF data indicates India is yet to overtake Japan as of May 2025.
“The confusion likely stems from Subrahmanyam’s reference to IMF projections for 2025-26, which may have been misinterpreted as reflecting the current situation.”
India’s GDP is projected to be $4.187tn for the 2026 financial year and Japan’s $4.186tn for the 2025 calendar year, according to the IMF outlook.
This means India is expected to marginally overtake Japan by the end of 2025 but data to establish this will not be clear until May 2026 when India’s GDP estimates for the fiscal year 2025-26 are published, Rajeswari Sengupta, an associate professor of economics at the Indira Gandhi Institute of Development Research in Mumbai, tells The Independent.
Garcia-Herrero says if India does overtake Japan, it’ll be by $0.001tn, an extremely narrow margin in the context of national GDP.
“Only GDP size is not a good enough measure of how India is doing. More focus on GDP per capita and income distribution should be a priority,” she says.
There are other caveats. For one, senior economist Rafiq Dossani notes, India manages its currency more tightly than Japan does. If the yen happens to appreciate against the rupee by even 1 per cent between now and 31 March 2026, all else being equal, Japan’s GDP will still be higher.
“It’s probably better to state India’s achievement as saying that it is expected to catch up with industrial powerhouse Japan but still has a long way to go to achieve the same living standards as [those] enjoyed by the Japanese,” he tells The Independent.
By IMF projections, India’s economy is expected to grow by 6.2 per cent in the year 2026 and 6.3 per cent in 2027. The Reserve Bank of India estimates India’s GDP will grow by 6.5 per cent in 2026, down from the previous expectation of 6.7 per cent.
Sengupta says it is “indeed commendable” that India’s GDP continues to grow after increasing by an average of 6-6.5 per cent over the last three decades. She also notes, however, that India surpassing Japan has as much to do with Japan’s economic slowdown as with India growing.
“Over the last 10-15 years the Japanese economy has shrunk owing to slowing productivity and a rapidly ageing population,” she says. “Between the mid-1990s and 2023, Japan’s nominal GDP declined from $5.3tn to $4.2tn. During this time the Indian economy was growing rapidly and the nominal GDP more than doubled. Hence, it’s not a fair comparison between two growing economies. It is a comparison between a growing and a stagnating economy.”
In the 1980s, Japan was tipped to become the world’s largest economy as it experienced a remarkable economic boom. Instead, it entered a prolonged period of stagnation known as the “Lost Decade” in the 1990s, when Japan’s economy grew slowly and was beset by deflation and a rapidly ageing population. It soon fell behind the new economic powerhouse China.
In the case of India, which surpassed the UK as the fifth-largest economy in 2023, the socioeconomic picture is complex as the vast majority of the population lives on the margins of sustenance.
Garcia-Herrero says the reality is that “India is still poor”. Its per capita nominal GDP is projected to be $2,880 in 2025 compared to $33,960 in Japan.
Per capita GDP is a measure of national economic output per person. When average incomes are adjusted for purchasing power parity, the scale of the gulf between the two countries reduces slightly – according to IMF estimates, India’s per capita income on this measure is projected to be $11,228 for 2025.
But that still compares to $52,712 for Japan, and even China – with a population roughly as big as India’s, has a significantly higher per capita income of $27,093.
“This shows Japan is still far ahead in terms of living standards, even if the overall size of the two economies is now similar,” Sengupta says.
“Human Development Indicators are still poor for India with challenges in education, healthcare, and poverty reduction.” Garcia-Herrero says. “Inequality is also an issue, certainly compared to Japan.”
Sengupta says more attention needs to be paid to the quality of growth and raising living standards for the majority of the country’s 1.4 billion people. Focusing on the absolute size of the country’s GDP, she argues, ultimately isn’t particularly helpful.
