Digital Team
India overtakes Japan in GDP rankings, driven by domestic demand, reforms and infrastructure-led growth
India has officially emerged as the world’s fourth-largest economy, overtaking Japan, according to the latest provisional estimates by multilateral agencies and government data released in early 2026. The milestone reflects India’s sustained high growth, robust domestic demand, large-scale infrastructure investment, and structural reforms that have strengthened the economy despite global uncertainty. Economists say the shift signals India’s growing influence in the global economic order.
India Becomes World’s 4th Largest Economy: What the Data Shows
India’s ascent to the fourth position comes after years of consistent expansion, even as advanced economies grapple with slowing growth, high inflation, and geopolitical disruptions.
According to estimates based on nominal GDP, India has surpassed Japan, which has struggled with prolonged stagnation, currency depreciation, and an ageing population. India now trails only the United States, China, and Germany in global economic rankings.
“India’s rise reflects strong fundamentals—demographics, consumption, and policy continuity,” a senior government official said, citing data from international financial institutions.
Key Highlights
- India overtakes Japan to rank 4th globally
- GDP growth remains above 6.5% despite global headwinds
- Infrastructure and services drive momentum
- Manufacturing and digital reforms gain traction
Domestic Demand and Infrastructure Drive India’s Growth Story
A defining factor behind India becoming the world’s fourth-largest economy is the strength of domestic consumption. With a large and young population, rising urbanisation, and improving income levels, internal demand has remained resilient even during global slowdowns.
Government-led infrastructure spending has played a critical role. Massive investments in highways, railways, ports, airports, and digital connectivity have boosted productivity while creating employment.
Economists point out that capital expenditure has had a strong multiplier effect, stimulating private investment and improving long-term growth potential.
Manufacturing Push and Digital Public Infrastructure
India’s manufacturing sector has also shown steady improvement, aided by the Production-Linked Incentive (PLI) schemes across electronics, semiconductors, pharmaceuticals, and renewable energy.
At the same time, Digital Public Infrastructure (DPI)—including Aadhaar, UPI, and the Open Network for Digital Commerce—has reduced transaction costs and expanded formalisation.
These reforms have helped India attract global supply chains seeking alternatives amid geopolitical realignments.
Services Sector Remains the Economic Anchor
While manufacturing is gaining ground, services continue to anchor India’s economy. Information technology, financial services, tourism, and professional services account for a large share of GDP and exports.
India’s global leadership in IT services has remained intact, with steady demand from the US and Europe. Financial inclusion initiatives and fintech innovation have further deepened economic participation.
Analysts say the services sector provides stability even during external shocks, cushioning India against volatility in global trade.
Why Japan Slipped as India Rose
Japan’s economy has faced structural challenges, including low productivity growth, deflationary pressures, and demographic decline. The weakening yen has further reduced Japan’s nominal GDP ranking.
In contrast, India benefits from favourable demographics, expanding labour participation, and a reform-driven policy environment.
“The crossover is symbolic of shifting global economic power,” said an economist with a leading think tank. “Asia’s growth engine is increasingly diversified.”
Can India Become the World’s Third-Largest Economy?
With Germany currently holding the third position, economists believe India could climb another rank within the next decade if current trends continue.
However, experts caution that sustained reforms are essential. Challenges such as job creation, income inequality, climate risks, and global trade disruptions must be addressed to maintain momentum.
Global headwinds—including geopolitical tensions, volatile energy prices, and financial tightening—remain risks for 2026 and beyond.
India’s Fourth Rank Signals a New Global Reality
India becoming the world’s fourth-largest economy marks a defining moment in its post-reform economic journey. The milestone underscores the impact of domestic demand, infrastructure expansion, and policy continuity. While challenges remain, India’s growth trajectory positions it as a key pillar of global economic stability in the coming decade.
❓ FAQs: India as the World’s 4th Largest Economy
Q: When did India become the world’s 4th largest economy?
A: India achieved the ranking in early 2026 based on provisional GDP estimates.
Q: Which country did India overtake?
A: India overtook Japan in nominal GDP rankings.
Q: What factors drove India’s rise?
A: Strong domestic demand, infrastructure spending, reforms, and services growth.
Q: Can India become the third-largest economy?
A: Economists believe it is possible within a decade if reforms continue.
Q: Which countries are ahead of India now?
A: The US, China, and Germany.
References
https://www.newsonair.gov.in/india-becomes-worlds-4th-largest-economy-surpasses-japan-niti-aayog
https://ddnews.gov.in/en/india-overtakes-japan-to-become-worlds-4th-largest-economy-niti-aayog-ceo
