Why India's Now the 4th Largest Economy Ahead of Japan
Introduction
In 2025, India recorded a GDP of 4.2 trillion, surpassing that of Japan of 4.1 trillion (IMF data, 2026). India was a country that was widely referred to as a poor country just a decade ago. How did it beat an old, established technological and manufacturing powerhouse? It is fast growth, young labour force and smart policy choices. You will discover the motives of India taking off in this blog, and what you can apply in your own investments or business approach.
India’s Explosive GDP Growth
Breaking Records in Growth Acceleration
In 2025, India had a growth rate of 8.2 percent in the economy, as opposed to Japan with 0.9 percent (World Bank stats). In 2020 alone, India has registered 75 percent cumulative growth, with Japan recording 15 percent.
Economist Raghuram Rajan says: India is on the accelerated path by radical reforms. This expansion is not a single-time turnaround but rather a structural transformation that has been built up over time.
The Transition of Services to a Balanced Economy.
Still, services lead with 55 percent of GDP, but manufacturing has risen to 18 percent, which is an indicator of a healthier balance.
Real life evidence:
- India has increased its auto exports to fifty billion dollars in 2025.
Takeaways:
- Monitor the quarterly GDP of Track India to invest.
- Continuous expansion of portfolios in to emerging markets.
Technology and Entrepreneurship are Driving the Growth.
Unicorn Boom and Digital India.
It is estimated that there are 150+ unicorns in India today, targeting 500B valuation in 2026. Scaled platforms have changed everyday living and business.
Case study:
- Flipkart follows the footsteps of Amazon, which has 500 million users today.
Digital backbone:
- UPI facilitates 15 billion transactions monthly, making India the largest real-time payment market
Artificial Intelligence and Innovative Advantage Over Japan.
In India, 80,000 patents have been registered in a year, which is 20-years later than 2024. The software strength of the country forms the basis of the international innovation. Nandan Nilekani sums it up: Our coders construct the software base of the world.
Action steps:
- Take AI and data classes to access the talent system in India.
- Indian tech ETFs can be considered as an opportunity to be exposed to fast innovation.
Revival and Supply Chain Shift Manufacturing
Make in India: Matter of Results.
There is an increase in the production of manufacturing in
India by 12 percent per year, and India is currently the third largest
manufacturer in the world.
Scenario:
Apple has recently started producing 25 percent of the iPhones in India, which generates 100K jobs. Exports grew to over 800 billion as compared to the growth pace of Japan.
Why Japan Lags Here
Factories in Japan are old; the ones in India are modern, are automated and are cheap. The shift has been increased by policy. The PLI scheme of India had been able to attract investments to the tune of 120 billion.
Key lessons
Population Titan vs. Japanese Recession.
The Workforce is Driven by Youth Dividend.
The demographics of India are superpower: 65 per cent of the
population is below 35, and it includes 12 million workers annually. Japan on
the other hand, loses 500,000 workers each year.
Case:
The IT industry in India has 5 million workers and now has employees who are exporting services worth 250 billion dollars.
Training and Professional Development.
Takeaways:
- To expand more quickly, multinational corporations can hire Indian talent.
Difficulties Overcoming-and the Way Before
Addressing Inflation and developing Infrastructure
RBI activities have allowed India to maintain inflation at 4.5 percent. In the meantime, infrastructure expenditures will reach one and a half trillion dollars by 2030, and roads will be 50 percent larger.
The Japan Comparison
The per capita GDP of India is at a low level of ($3000);
this is only a difference between Japan whose per capita is at ($34,000); this is
closing in with growth.
What is in store:
- By 2028, the IMF predicts that India's economy will rank third globally.
conclusion:
India was not the only country that had become greater than Japan. It was powered by:
- Sustained growth
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