India has surpassed Japan to become the world’s fourth largest economy and is set to replace Germany from the third rank in the next 2.5 to 3 years, said a release from the government.

“With GDP valued at USD 4. 18 trillion, India has surpassed Japan to become the world’s fourth-largest economy and is poised to displace Germany from the third rank in the next 2.5 to 3 years with projected GDP of USD 7.3 trillion by 2030," said the release.  

“The growth momentum further surprised on the upside, with GDP expanding to a six-quarter high in Q2 of 2025-26, reflecting India’s resilience amid persistent global trade uncertainties. Domestic drivers-led by robust private consumption-played a central role in supporting this expansion,” the release pointed out.

“India is among the world’s fastest-growing major economies and is well-positioned to sustain this momentum. With the ambition of attaining high middle-income status by 2047- the centenary year of its independence- the country is building on strong foundations of economic growth, structural reforms, and social progress,” the release added.

It may be noted that India’s real GDP grew 8.2% in Q2 FY 2025-26, up from 7.8% in Q1 and 7.4% in Q4 of FY 2024-25. The release said the high-frequency indicators point to sustained economic activity. “Inflation remains below the lower tolerance threshold, unemployment is on a declining trajectory, and export performance continues to improve. Furthermore, financial conditions have stayed benign, with strong credit flows to the commercial sector, while demand conditions remain firm, supported by a further strengthening of urban consumption,” the release pointed out.

“Looking ahead, domestic drivers- favourable agricultural prospects, the sustained effects of GST rationalisation, benign inflation, and the strong balance sheets of corporates and financial institutions- coupled with supportive monetary and financial conditions, are expected to continue bolstering the economic activity,” the government said in a release.  

“External factors such as services exports are projected to remain robust, while the swift conclusion of current trade and investment negotiations offers additional upside potential. Ongoing reforms are likely to further enable growth prospects. Present macro-economic situation presents a rare “goldilocks period” of high growth and low inflation,” it added.