India has overtaken Japan to become the fourth largest economy in the world

The country is now ranked behind only the United States, China and Germany, with officials estimating that if the current trends continue, India is expected to overtake Germany as well and take third place within two and a half to three years, with an expected GDP of 7.3 trillion dollars by 2030.

Economic growth in India in 2025 exceeded the most optimistic forecasts. In the second quarter of the fiscal year 2025-26, real growth of 8.2% was recorded, a significant acceleration compared to the previous quarters. The Governor of the Reserve Bank of India (RBI) defined the situation as a “Golden and the Three Bears” economy, a rare combination of high growth and extremely low inflation of about 2%. The strong domestic demand and the increase in the export of goods, such as engineering products, electronics and pharmaceuticals, were key growth engines.

The political uncertainty took its toll on the financial markets. The Indian currency, the rupee, recorded its sharpest annual drop in three years, and the stock market posted its worst performance relative to emerging markets since 1994. Many foreign investors, fearing the cool relations between the superpowers, pulled money out of India in record volumes and sold stocks despite reasonable valuations.

Despite the short-term challenges, long-term forecasts remain optimistic. The International Monetary Fund (IMF), the World Bank and the rating agencies expect India to grow between 6.2% and 7.6% in the coming years. Morgan Stanley Bank estimates that government reforms and a potential trade agreement with the US may lead to a recovery in the stock market during 2026, while the country strives to achieve upper-middle income status by 2047.