India likely to overtake Japan as 4th largest economy in current fiscal

New Delhi: India is likely to become the world's fourth largest economy in the current fiscal on the back of its projected record-beating growth rate of 6.3-6.8 per cent that would help it overtake Japan.

India recorded a growth of 6.5 per cent for the financial year ended March 2025 against 9.2 per cent in the previous fiscal.

The size of the Indian economy rose to Rs 330.68 lakh crore or about $3.9 trillion in FY25 and is set to cross $4 trillion in the current fiscal to become the fourth largest in the world in the ongoing financial year.

GDP's provisional estimates for FY25 are in line with the expectation of 6.5 per cent and India still outshines the contemporary economies, Chief Economic Adviser (CEA) V Anantha Nageswaran said on Friday.

For the current financial year, he said, the government has retained its outlook at 6.3-6.8 per cent, with private consumption, especially the rural rebound, and resilient services exports as the key drivers.

Multiple agencies project India's growth to be in the range of 6.3–6.7 per cent in FY26, he said, adding that silver linings included declining crude oil prices to potentially lower import bills and create fiscal space as well as alleviate external economic pressures.

Besides, he said, food inflation remains benign due to a good rabi harvest, higher summer sowing, and healthy procurement.

Further, he said, exports are expected to remain robust; record forex reserves providing about 11 months of import cover and expected above normal monsoon.

Asked about the position of the Indian economy in dollar terms, Nageswaran said the IMF had given a dollar GDP projection of $3.9 trillion for FY25, which matched with the Finance Ministry's internal estimates.

"What Niti Aayog CEO said was clarified by Niti Aayog whole time member and former CEA Arvind Virmani that it is the story for 2025-26," he said in response to the claim made by Niti Aayog CEO BVR Subrahmanyam that India has already overtaken Japan.

The International Monetary Fund (IMF), in its World Economic Outlook (WEO) report released in April, had said that India is expected to be the fourth largest economy in the world with a GDP of $4.19 trillion in 2025, ahead of Japan.

"India is in the process of becoming the fourth largest economy, and I am personally confident that will happen by the end of 2025 because we need (data) of all 12 months GDP to say that to assert that. So to say till then, it remains a forecast,” Virmani had said.

Citing IMF data, Subrahmanyam, last week, said that the size of the Indian economy today is larger than Japan's.

"We are the fourth largest economy as I speak. We are a $4 trillion economy as I speak," the Niti Aayog CEO had said.

On the prospects for the current financial year, Nageswaran said, the momentum of the economy picked up in the fourth quarter of the last financial year is continuing in the first quarter as reflected by the high-frequency data.

High-frequency indicators for April 2025 show strong industrial and commercial activity, he said, adding that interest rate moderation by the RBI and tax relief provided by the government are going to boost overall consumption.

Capital formation by the private sector is also expected to pick up as capacity utilisation levels are high, he added.