India Surpassed Japan as the World’s Fourth Largest Economy

India has overtaken Japan to become the world’s fourth-largest economy in 2025, with a nominal GDP of approximately $4.19 trillion, slightly ahead of Japan’s $4.19 trillion, according to the International Monetary Fund’s (IMF) World Economic Outlook data from April 2025. This milestone reflects India’s robust economic growth, driven by strong domestic demand, a growing middle class, and reforms in manufacturing and infrastructure.

The IMF projects India’s GDP to reach $5.58 trillion by 2028, potentially surpassing Germany to claim the third spot, trailing only the United States and China. Meanwhile, Japan’s slower growth, at 0.6% for 2025, is hampered by a weak yen and global trade challenges. India’s rise to the fourth-largest economy, overtaking Japan in 2025, has significant implications for both nations, global trade, and geopolitical dynamics.p

India’s economic ascent strengthens its position in global forums like the G20, BRICS, and IMF, giving it greater influence over international economic policies. It attracts more foreign direct investment (FDI), with global companies eyeing India’s vast market and manufacturing potential under initiatives like “Make in India.” Strong domestic consumption, a young workforce (median age ~28), and rapid urbanization fuel India’s growth. The IMF projects India’s GDP to grow at 6.5% in 2025, outpacing most major economies.

Investments in infrastructure, technology, and renewable energy (e.g., India’s push for 500 GW of non-fossil fuel energy by 2030) bolster long-term prospects. India’s economic clout enhances its role as a counterbalance to China in the Indo-Pacific, aligning with Western interests in diversifying supply chains away from China. Strengthened ties with the U.S., EU, and ASEAN nations could lead to more trade agreements and strategic partnerships.

India must address income inequality, with 21% of its population below the poverty line (World Bank, 2023). Sustaining inclusive growth is critical. Infrastructure bottlenecks, regulatory hurdles, and skill gaps in the workforce could slow progress if not addressed. Japan’s slower growth (0.6% projected for 2025, per IMF) reflects structural challenges like an aging population (median age ~48) and declining workforce.

A weak yen (trading at ~150 to USD in early 2025) increases import costs, straining consumers and businesses. Japan’s slip to fifth place reduces its relative influence in global economic governance, though it remains a leader in technology and innovation. It may deepen reliance on alliances like the Quad (with the U.S., India, and Australia) to maintain geopolitical relevance.

Japan can leverage its advanced technology and expertise in areas like AI, robotics, and green energy to collaborate with India, tapping into its growing market. Japanese firms (e.g., Toyota, Sony) are already investing heavily in India, which could offset domestic economic constraints. India’s nominal GDP of $4.19 trillion in 2025, with a projected growth rate of 6.5%. Real GDP (PPP) is significantly higher (~$14 trillion), reflecting lower living costs. Japan’s nominal GDP of $4.19 trillion, with a sluggish 0.6% growth rate. Japan’s real GDP (PPP) is ~$5.5 trillion, constrained by high costs and slower expansion.

India’s population of 1.44 billion, with 65% under 35 years old, provides a vast labor force and consumer base. However, unemployment (4.7% in 2024) and underemployment remain challenges. Japan’s populations of 124 million, with 29% over 65, faces labor shortages and rising pension costs, limiting economic dynamism. India is a services-driven economy (54% of GDP), with growing manufacturing (14%) and agriculture (15%). Its digital economy (e.g., UPI transactions) is booming, with 1.2 billion internet users. Japan is highly industrialized economy, with manufacturing (20% of GDP) and services (70%) dominating. It excels in high-tech exports but faces competition from China and South Korea.

India’s GDP perasku (nominal) is ~$2,900, reflecting a lower cost of living but significant income disparities. Japan’s GDP per capita is ~$33,800, indicating higher living standards but also higher costs and stagnant wage growth. India exports (~$760 billion in 2024) focus on software, gems, and petroleum products. FDI inflows reached $85 billion in 2024, driven by tech and infrastructure. Japan exports (~$700 billion) center on automobiles, electronics, and machinery. FDI outflows are significant, with Japan investing $30 billion in India over the past decade.

India must improve ease of doing business (ranked 63rd in World Bank’s 2020 index, with no newer data) and address environmental concerns (e.g., air pollution in major cities). Japan faces deflationary pressures, high public debt (252% of GDP in 2024), and reliance on global supply chains vulnerable to disruptions. India’s rise signals a shift toward emerging markets, with Asia (led by China and India) driving global growth. By 2030, Asia is projected to account for 60% of global GDP (ADB estimates).

India’s manufacturing push (e.g., PLI schemes) positions it as an alternative to China, while Japan’s expertise in high-tech complements India’s scale. Both nations face pressure to meet net-zero goals (India by 2070, Japan by 2050), but India’s coal reliance and Japan’s energy import dependence create divergent challenges. India’s ascent to the fourth-largest economy underscores its potential as a global economic powerhouse, driven by demographics and reforms, but it must navigate inequality and infrastructure gaps.

Japan, while slipping to fifth, remains a high-income, innovation-driven economy, though it grapples with demographic decline and stagnation. The divide highlights India’s momentum versus Japan’s maturity, with opportunities for collaboration in technology, trade, and sustainability shaping their future roles on the global stage.