India’s economy will become the world’s fourth-largest

By Leo Mirani, Asia correspondent, The Economist

India will accomplish a remarkable feat in early 2026. By the close of the financial year in March it will overtake Japan to become the world’s fourth-largest economy—and within striking distance of the third-largest, Germany.

The milestone is about more than bragging rights. It shows tremendous progress. At the dawn of this century Japan was the world’s biggest economic power after America, and India was not even in the top ten. Since then India has zoomed past Brazil, Mexico and Canada, several European countries, and its own former coloniser, Britain. The imf reckons that by 2030 it will trail only America and China.

The fruits of this prosperity are visible across the country. India’s cities have sprouted skyscrapers and luxurious homes; its highways are thronged with vehicles; its equity markets are huge and thriving. Most important, hundreds of millions of people have lifted themselves out of extreme poverty. A middle class has emerged, 400m-strong and growing. Indians, and their government, would be justified in celebrating their successes.

But they should not break out the champagne just yet. For all its growth, India remains a poor country. A more revealing measure of India’s development than the size of the economy is its gdp per person. Though it will soon edge past Japan in overall gdp, the fruits are shared among more than 11 times as many people. Adjusted for the cost of living, India ranks 126th on this measure. That is an improvement from 25 years ago, when it ranked 152nd. But at just over $12,000 per head, around the same level as Jordan or Uzbekistan, it is only about two-thirds of the average for emerging economies.

Another way to think about India’s economic rise is to consider whether life has improved for its people. The rate of extreme poverty plummeted from 27% to just 5% in the decade to 2022, according to the World Bank. But the absolute numbers are still staggering. In 2022, 75m—more than the population of Britain—survived on less than $3 a day. Another 267m, about twice the population of Mexico, scrape by on less than $4.20 a day, the World Bank’s poverty line for lower-middle income countries like India. The country ranks 102nd out of 123 on a ranking compiled by the Global Hunger Index.

And India fares poorly on many other rankings and indices, too. It is 176th out of 180 countries on an index measuring environmental performance compiled by Yale University; 151st out of 180 on a press-freedom index published by Reporters Without Borders, an advocacy group; and 41st on a democracy index put together by the Economist Intelligence Unit, our sister company.

Shepherding an economy from relatively puny to among the biggest in the world represents a huge achievement by India’s leaders. But size is not everything. As hundreds of millions of Indians would attest, quality of life matters, too. ■