India has now surpassed Japan to become the world’s fourth-largest economy in nominal GDP, with a GDP of $4.18 trillion, according to the government’s year-end economic review.
The country is poised to overtake Germany within the next 2.5 to 3 years, potentially becoming the third-largest economy, with a projected GDP of $7.3 trillion by 2030. This milestone, once confirmed by the IMF in mid-2026, highlights India’s steady rise on the global economic stage.
Former RBI Governor Duvvuri Subbarao, writing in the ‘Financial Times’, noted that India has long swung between fast growth marked by inflation and external imbalances, and periods of stability achieved at the cost of slower expansion.
He observed that India’s recent performance, over 7% growth despite global slowdowns, falling inflation and a manageable external deficit, has renewed debate on whether the economy has entered a structurally higher growth phase.
Subbarao credited improved macroeconomic management, including inflation targeting and predictable monetary policy, along with more credible fiscal policy and reduced dependence on foreign capital. Reforms such as GST, bankruptcy laws and digital public infrastructure have streamlined markets, lowered transaction costs and improved financial inclusion. Public investment in roads, ports and logistics has also eased supply bottlenecks, while incentives are attracting manufacturing investment in electronics and renewables.
However, Subbarao cautioned that private investment remains a weak link. He argued that truly sustained growth will require broader participation beyond public spending, particularly stronger private capital formation and job creation in manufacturing. Without this, the current momentum may prove temporary.
Growth finds its ‘Goldilocks’ balance
Encouragingly, signs of this shift are emerging in India’s growing entrepreneurial ecosystem, including within the diaspora. Indian-origin entrepreneurs Ankur Jain, Adarsh Hiremath and Surya Midha have been featured on Forbes’ 40 Under 40 list, while Nikhil Kamath is the only India-based entrepreneur on the list. Together, they command a combined net worth of over $11 billion, reflecting the rising role of private enterprise in driving India’s next phase of growth. (For more information, see page 19.)
The number of billionaires under 40 has surged, particularly in the AI sector, matching the record set in 2021. Forbes identified 71 billionaires under 39, mostly in technology (48), followed by finance and investments (12). India ranks third with six young billionaires, after the US (32) and China (8). The list also highlights eight women entrepreneurs.
The 'Made in India' initiative, launched by Prime Minister Narendra Modi in 2014, has now completed 11 years in 2025. It has revitalised India's industrial base, attracted investments, and established the country as a global manufacturing hub. (For more information on page 19)
This success has laid a strong foundation for India’s economic future, which is projected to grow at 6.9% in FY2026-27, driven by structural reforms, tax measures, and new trade agreements.
India's economy is entering a "Goldilocks" phase, with strong growth and moderate inflation. Retail inflation is expected to be around 3.8% for FY27, while real GDP growth is forecasted at 7.4% for FY2025-26. The rupee may weaken slightly, averaging 92.26 against the US dollar in FY27. Together, these factors reflect India's rising economic strength, supported by both domestic initiatives and global trade advancements.
Ind-Ra also predicts improved government finances, with the Centre's debt decreasing to 55.5% of GDP by FY27, from 56.3% this year. Free trade agreements with New Zealand, the UK, and Oman are expected to attract foreign investment and help manage the current account deficit. Ahead of the 2026-27 Union Budget, Ind-Ra expects announcements on customs duty rationalisation and allocations under the Viksit Bharat–G RAM G Act. The budget size could rise to Rs 52 lakh crore, although tax revenues may fall short by Rs 2 lakh crore, offset by higher non-tax revenues and lower capital expenditure. Despite these pressures, the fiscal deficit is expected to remain at 4.4% of GDP.
As India moves forward with these reforms and solidifies its economic position, it is also becoming a diplomatic force, building stronger global relationships. With a growing economy, robust infrastructure, and an expanding geopolitical influence, India is steadily positioning itself to be one of the world's next superpowers.
