India Becomes the World’s Fourth Largest Economy, Surpasses Japan

The year 2025 proved to be historic for India’s economy. During this year, India surpassed Japan to become the world’s fourth-largest economy.

In the second quarter (Q2), GDP growth accelerated to 8.2%. Retail inflation declined sharply to 0.71% in November, while the unemployment rate fell to 4.7%, the lowest level since April 2025.

With high economic growth and extremely low inflation, the current phase is being described as a “Goldilocks Period” for the Indian economy.

India’s total GDP valuation has now reached $4.18 trillion (approximately ₹350 lakh crore). After overtaking Japan, India is expected to surpass Germany within the next 2.5 to 3 years. By 2030, India is projected to become the world’s third-largest economy with a valuation of $7.3 trillion (around ₹655 lakh crore).

Considering the strong growth trend, the Reserve Bank of India (RBI) has raised its full-year growth forecast from 6.8% to 7.3%.

The biggest relief for the general public has come on the inflation front. Retail inflation (CPI), which stood at 4.26% at the beginning of 2025, declined to 0.71% by November. This reduction was mainly driven by falling food prices.

In response to easing inflation, the RBI also reduced interest rates by 0.25%, bringing the policy rate down to 5.25%. This is expected to make home loans and car loans more affordable.