India Set To Be Fourth Largest Economy, But What Does The GDP Per Capita Say? EXPLAINED

As per the IMF estimates, India is projected to record a GDP of $4.187 trillion by the end of the current financial year (April 2025 to March 2026), overtaking Japan.

But with a population of over 1.4 billion, the country’s GDP per capita tells a different story.

Source : ABPLIVE AI

India is on track to claim the position of the world’s fourth-largest economy by the end of FY2025-26, according to the International Monetary Fund’s (IMF) latest World Economic Outlook report. This milestone would place India ahead of Japan, trailing only behind the United States, China, and Germany.

The report shared estimates for the global economies in the current financial year (April 2025 to March 2026), according to which India is projected to record a GDP of $4.187 trillion by the end of the fiscal year. 

Notably, according to the report, Japan is estimated to clock a GDP of $4.186 trillion by the end of FY26. Gross Domestic Product (GDP) typically is the sum total of value of goods and services produced by a country annually and is used as a metric to understand the size of an economy.

This anticipated leap would mark another chapter in India's rapid economic ascent. Since overtaking the UK to become the fifth-largest economy, the country has maintained a consistent growth trajectory.

If achieved, then India would have climbed 6 places from the 10th largest economy in 2014 to the 4th largest in 2025/26, in just a period of a little over a decade.

However, despite the celebratory headlines, India’s economic rise is accompanied by several caveats. The macroeconomic numbers, while impressive, don’t fully reflect the quality or inclusiveness of growth.

Per Capita Income Still Lags Behind Global Peers

India’s nominal GDP may be crossing new milestones, projected to double and hit $4 trillion in 2025 — a 105 per cent increase from 2014. But with a population of over 1.4 billion, the country’s GDP per capita tells a different story. At just $2,880, India remains far behind China ($13,690) and Japan ($33,960), according to IMF estimates, reported The Economic Times.

GDP per capita is often used to evaluate a country’s average income and economic well-being. In this regard, India’s rank is nowhere near the top 100, not even when adjusted for purchasing power parity. The limited gains in per capita income are partly due to structural issues. Economist Sachchidanand Shukla noted, “A large population (1.4 billion) dilutes the gains of the GDP doubling. Also, informal employment (approximately 90 per cent of workforce) and low female workforce participation (26 per cent vs. global 47 per cent) limit per capita gains.”

Still, India has made some progress. “That is keeping pace with the overall GDP growth as the population growth is slowing down with fertility rates going close to the replacement rate of 2.2. However, there are regional disparities owing to differential population growth rates as well as the pace of economic development,” the report said citing Ranen Banerjee.

Sustained Growth Ahead, But Reforms Are Critical

Looking to the future, India hopes to reach $5 trillion in GDP by 2027 and emerge as the third-largest global economy by 2028, overtaking Germany. Yet, achieving long-term stability will require consistent reform measures.

Experts argue that reforms must focus on simplifying business compliance and enhancing infrastructure. Additionally, creating jobs, driving inclusive development, boosting education, and skilling has to be the priority if long-term and equitable growth has to be achieved. 

While India is increasingly viewed as a key strategic and economic player by global powers like the US and China, experts caution that the benefits of growth must be more equitably shared. Creating a resilient manufacturing ecosystem and expanding employment opportunities, especially for the youth — will be essential to ensure that India's rise is not only fast, but also fair and sustainable.