India is set to achieve a major economic milestone, with the International Monetary Fund (IMF) forecasting that the country will overtake Japan to become the fourth-largest economy globally during the 2025–26 financial year. While this achievement signals India’s growing global stature, it has also sparked renewed debate on the need for sweeping structural reforms to secure long-term economic resilience.
According to the IMF’s April World Economic Outlook, India’s nominal GDP is projected to hit $4.187 trillion, narrowly outpacing Japan’s estimated $4.186 trillion. Should the projection materialize, India will rank just behind the United States, China, and Germany.
Growth Driven by Geopolitics and Supply Chain Realignment
B.V.R. Subrahmanyam, CEO of India’s Niti Aayog, attributed the projected climb in global rankings to a mix of strong domestic fundamentals, improved global supply chain positioning, and favorable external conditions.
“India is now seen as a reliable link in global value chains amidst the changing geopolitical and trade dynamics,” Subrahmanyam noted, adding that India may benefit from relatively lenient trade terms, especially from the U.S., at a time when tariffs are hampering many other economies.
Reforms Needed to Sustain Momentum
Despite the optimism, experts and industry veterans cautioned against complacency. Professor Harsh Pant of King’s College London noted, “India’s economic narrative is getting stronger globally, but maintaining momentum requires consistent, deep reforms.”
As India inches closer to surpassing Japan, business leaders are calling for greater focus on boosting income levels and addressing inequality. Anand Mahindra, Chairman of Mahindra Group, acknowledged the symbolic importance of surpassing Japan but warned that the next big challenge lies in raising GDP per capita—currently just $2,500 compared to Japan’s $33,800.
“We must remain unsatisfied,” Mahindra posted on X (formerly Twitter), advocating for urgent improvements in governance, education, infrastructure, and manufacturing.
Economist Naushad Forbes echoed this sentiment, saying Japan’s economic slowdown helped open the path for India’s rise, but raising living standards must now be India’s priority. “There’s still a long journey ahead in terms of human capital and productivity,” he said.
Rising Tensions Could Complicate Outlook
India’s upward trajectory has not been without friction. A recent terror attack in Indian-administered Kashmir led to retaliatory airstrikes on suspected militant camps in Pakistan, sparking fears of a broader conflict. Although a ceasefire was reached by May 10, the incident raised concerns among economists and global observers over the potential for geopolitical flare-ups to derail economic progress.
Former U.S. President Donald Trump claimed credit for mediating the ceasefire, which drew mixed reactions in India. Meanwhile, author Chetan Bhagat, writing in The Times of India, urged the country to move past its historical rivalry with Pakistan and focus on economic development. “India is on a promising path, but it demands unity, diligence, and policy discipline,” he wrote.
Stability Reassures Global Investors
Despite the tensions, Indian policymakers have maintained a calm stance to reassure foreign investors. According to Professor Pant, India’s economic focus has increasingly “de-hyphenated” itself from its conflict-laden past with Pakistan, especially in the eyes of the global investment community.
Nevertheless, corporate leaders warned that India’s growth should not distract from persistent institutional inefficiencies and income disparity.
Business Environment Still Needs Work
Subodh Bhargava, former president of the Confederation of Indian Industry (CII), warned of the dangers of policy stagnation. He emphasized the need to reduce bureaucratic red tape and improve public spending efficiency.
India has made noticeable improvements in its business climate, leaping from 142nd to 63rd in the World Bank’s Ease of Doing Business rankings between 2014 and 2020. Yet, many believe more can be done to attract investment and enhance export competitiveness.
As India edges closer to overtaking Japan, experts agree the moment is historic—but sustaining it will depend heavily on India’s willingness to undertake deep, transformative reforms across all levels of governance and development.
