India Closing in on Japan as World's Fourth-Largest Economy

Alanbatnews -

India's rapidly growing economy is poised to potentially overtake Japan's, possibly becoming the world's fourth-largest, propelled by its large population and a youthful demographic.

While the exact timing remains uncertain due to currency fluctuations, India's economic expansion is significantly outpacing Japan's, setting the stage for a potential shift in the global economic order.

Recent data suggests India's nominal GDP is approaching Japan's, fueled by a population of approximately 1.4 billion and a younger average age. Japan's economy, when measured in dollar terms, is showing signs of contraction, according to a Bloomberg report.

The Indian government anticipates its nominal GDP to exceed $4 trillion for the fiscal year ending in March 2026. In comparison, official Japanese data indicates an economy of around $4.4 trillion in the calendar year 2025.

The International Monetary Fund (IMF) had previously projected India surpassing Japan during the fiscal year 2025-2026. However, a 5% decline in the Indian currency in 2025 partially offset the growth when converted to dollars. Conversely, a stronger yen against the dollar supported Japan's dollar-denominated output.

India's economy is growing at a much faster rate, estimated at over 7% this fiscal year and the next, compared to Japan's approximately 1%. However, currency exchange rate movements can influence the timing of this economic shift.

Population growth is a key driver of India's economic surge. Its population has increased from around 361 million at independence in 1947 to over 1.4 billion today, expanding the labor market and consumer base. The median age in 2021 was 28 years, and approximately 65% of the population is expected to remain under 59 years old until 2036, according to the Ministry of Statistics.

This working-age segment drives demand for housing, automobiles, smartphones, and other consumer goods. Services remain a cornerstone of the economy, with cities transforming into hubs for information technology, business services, the financial sector, tourism, healthcare, and retail.

The Indian government is investing heavily in infrastructure and attracting foreign manufacturers by reducing bureaucracy, offering tax incentives, and providing production-linked support. Companies like Samsung and Foxconn have established large-scale smartphone production units in India.