Indian GDP figures projections give India false hope

For months, celebrated India’s “rise” to becoming the fourth-largest economy in the world - ahead of Japan. The reality is we are a $4 trillion economy,” citing IMF data as evidence. A closer look reveals that India’s ranking was based not on actual data, but on projections and those projections have since changed.

As of the IMF’s October 2025 update, Japan still holds the fourth spot, with India remaining fifth. The government on Friday welcomed the decision by the Japanese credit rating agency, Rating and Investment Information, Inc (R&I), to upgrade Indias long-term sovereign credit rating to BBB+ from BBB, while retaining the Stable outlook for the Indian economy.

Subrahmanyam’s statement wasn’t fabricated—but it was based on projected figures, not real-time data. The IMF’s April 2025 outlook estimated India’s GDP at $4.197 trillion and Japan’s at $4.196 trillion for 2025. A margin so thin that even minor currency or growth changes could flip the ranking. However, the October 2025 update corrected this optimism: India’s GDP is now $4.125 trillion, while Japan’s is $4.280 trillion.

Ragjuram Rajan says “Our nominal GDP has grown quite slowly actually relative to the past, only at around 8.8%. It's what we divide it by—the inflation number, which has been very low. And as a result, our overall real GDP growth has been quite strong,” he said. Rajan said India's inflation metrics may not fully capture reality.

Gross Domestic Product (GDP) measures the total value of goods and services produced within a country. But it’s not static - it depends on real growth, inflation, and exchange rates. For India, even a strong real growth rate can be offset by a weak rupee or lower-than-expected nominal growth. Japan, despite slower growth, benefited this year from a stronger yen and stable economic conditions, widening the gap between the two nations.

In April 2025, the IMF had overestimated India’s nominal growth and underestimated Japan’s resilience. India’s nominal GDP grew only 8.8% in April–June, while the rupee depreciated by nearly 4% by October. In contrast, Japan’s economy grew by 2% in real terms and its yen appreciated by over 5% against the dollar. These twin showing how currency dynamics can make or break global rankings.

For years, international institutions have tended to overproject India’s economic momentum. This “optimism bias” is driven by India’s population advantage, rapid digitization, and global investor sentiment. However, on-the-ground realities—uneven job creation, trade imbalances, and volatile capital flows—often temper these rosy forecasts. Japan, though slower, has the edge of industrial stability, high per capita income, and currency strength.

Prime Minister Narendra Modi, in his meeting with his Japanese counterpart Shigeru Ishiba will review the Special Strategic and Global Partnership between India and Japan, including defence and security, trade and economy, technology and innovation, as well as discuss issues of regional and global importance.

Prime Minister Narendra Modi, in his meeting with his Japanese counterpart Shigeru Ishiba this week, will review the Special Strategic and Global Partnership between India and Japan, including defence and security, trade and economy, technology and innovation, as well as discuss issues of regional and global importance.

According to the latest IMF data, India may finally surpass Japan in 2026, with a projected GDP of $4.506 trillion versus Japan’s $4.464 trillion—a razor-thin $42 billion difference. But this assumes India maintains near 9% nominal growth, a tall order given current headwinds. Realistically, most economists believe India may not overtake Japan until 2027 or 2028, depending on inflation, exports, and rupee stability.

India’s growth story is real, but the rupee’s depreciation often erodes it in dollar terms. Even if domestic production expands, a weakening currency means the world sees less of that growth. Japan’s stronger yen this year flipped the narrative, proving that exchange rates can quietly decide global rankings, even when GDP growth on the ground tells a different story.

But the IMF’s October outlook paints a more cautious picture. It projects India’s GDP at $5.46 trillion by 2029—still behind Germany ($5.67 trillion) and just ahead of Japan ($4.82 trillion). If India’s growth slips below expectations, even the fourth spot could remain uncertain by the end of this decade.

While rankings matter symbolically, they often overshadow deeper questions: Is growth translating into better lives? India’s challenge lies not in chasing Japan’s GDP, but in ensuring inclusive, resilient development—where productivity rises, inequality narrows, and innovation thrives. Becoming the “third-largest economy” means little if the average Indian still struggles with basic needs.