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The Print
2 days ago
- Business
- The Print
India's GDP victory over Japan is still a year away. Here's why
Equally clearly, the database presents estimates of India's GDP for fiscal year 2025-26 as $4.187 trillion and Japan's as $4.186 trillion—that is, India's GDP exceeds Japan's by 0.02 per cent in 2025-26. From this, many, if not most, analysts have erroneously concluded that this won't happen until March 2026. Why erroneous? Because it is a fiscal year conclusion, and the 'centre of gravity' of an April-March fiscal year is September. So, it is likely that the NITI Aayog CEO, in making his hasty conclusion, was wrong by only four months. As it happens, Subrahmanyam was hasty by approximately a year. Critics of the government's assertion make two points, one relevant and the other 'noisy'. The relevant point is that the IMF World Economic Outlook (WEO) database clearly shows that for the fiscal year 2024-25 (ending in March 2025), India's GDP was $3.9 trillion while Japan's was $4.0 trillion—that is, Japan was 2.6 per cent ahead. Fortunately, both Japan and India have the same fiscal year—April-March—hence adjustments to WEO data are not needed. There has been much discussion about the assertions made by BVR Subrahmanyam, the CEO of NITI Aayog, India's only official think tank. Speaking at a press conference following the 10th NITI Aayog Governing Council Meeting chaired by Prime Minister Narendra Modi and presumably attended by senior bureaucrats, Subrahmanyam said that 'as I speak', India has overtaken Japan in current dollar GDP. Note that his conclusion and inference pertains to current dollar GDP, and we have to contend with the conversion from rupees to US dollars, and from Japanese yen to US dollars. India and Japan numbers First, let us look at the Indian estimate. Data just released by the Ministry of Statistics and Programme Implementation (MoSPI) on Friday shows that India's GDP in current prices for January-March 2025 quarter was Rs 88.17 trillion, or annualised Rs 352.7 trillion. On 23 May, the last market day before Subrahmanyam's assertion, the exchange rate was Rs 85.4/$—that is, current GDP in March 2025 was 352.7/85.4 or $4.13 trillion. Indian nominal GDP is growing by about 10 per cent a year. So, by March 2026, we should expect current India GDP to reach $4.54 trillion. Now we examine the fortunes of Japan's GDP. The seasonally adjusted quarterly estimate of Japan's GDP is 624.9 trillion yen for Q1 of 2025. On 23 May, the exchange rate was 142.6 yen/$; hence Japan's GDP in March 2025 was $4.38 trillion, some 6.1 per cent ahead of India's GDP on the same date. Given that exchange rates change every day, we need to decide as to what exchange rate we should use. Amongst many, we can use a calendar year estimate, a quarterly estimate or a 23 May estimate. But no matter which one we use, it will be wrong because exchange rates do not remain constant, and the future is not asked to see, que sera sera. All of us are concerned with the 23 May estimate, hence the discussion and this note. Japan's nominal GDP growth has averaged 3.4 per cent for the last three years. Assuming this to be the average for 2025-26, the estimate for March 2026 is $4.53 trillion GDP (as 4.38*1.034). So it will be sometime in March 2027 that India's GDP will exceed Japan's in current dollars. Again, que sera sera, the conclusion will depend on what happens to exchange rates. Changes in exchange rates affect nominal dollar GDP calculations. Assume in March 2027 all estimates come true except the $ yen exchange rate changes from 142.7 to 135 (the yen has become stronger by 5.7 per cent), then Japan's GDP will be 5.7 per cent higher and the day of decision will be delayed beyond March 2027. How do we interpret the dash to conclusion by the CEO? As a sports junkie, I recall countless occasions over the last 50 years when a sprinter looked over his shoulder to see his competitor – and lost the race. Also read: GDP data revisions—why India still struggles with sharp variations Lesson for India—good data, bad data What do we learn from his data-heavy exercise? First, haste makes wrong. Second, and more importantly, what difference will it make to the price of tomatoes (as I am often inclined to say) if India GDP is equal to Japan GDP? Third, and most important, and as pointed out by many, what matters is equivalence in per capita GDP, and on this, we are decades away—whether measured in current $ or PPP $ or constant dollars. One final comment. It is unfortunate that in the last ten years, most of the decision-making bureaucracy has lost respect for the data. The bad quality household consumer expenditure data for 2017-18 has still not been released. Several analyses of the 2017-18 data (see the 2022 IMF Working Paper authored by me and my colleagues Karan Bhasin and Arvind Virmani, and several other documents and books) conclude that the 2017-18 data was of such bad quality that the world, and India, needed to examine why it was of such bad quality. By not releasing that data, we have created an atmosphere where it is 'open sesame' for domestic and international scholars to question good Indian data. Food for thought for Niti and decision-making bureaucrats. Surjit S Bhalla is a former Executive Director at the International Monetary Fund. He tweets @surjitbhalla. Views are personal. (Edited by Aamaan Alam Khan)
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Business Standard
3 days ago
- Business
- Business Standard
Datanomics: India closes in on Japan to be fourth-largest economy this year
India is likely to overtake Germany in 2028 as the third largest economy in the world, according to projections by the IMF Shikha Chaturvedi New Delhi Listen to This Article In 2024, the Indian economy stood moderately behind the world's fourth-largest economy — Japan — by $11.8 billion. A few years ago, India overtook the UK to become the fifth largest, and is now well on its way to rise to the fourth spot in the list of the top 10 largest economies in the world by overtaking Japan. The International Monetary Fund (IMF), in its World Economic Outlook (WEO) report released in April, had said that India is expected to be the
Hans India
3 days ago
- Business
- Hans India
India is Not Yet the Fourth-Largest or a $4-Trillion Economy; NITI Aayog CEO's IMF Claim Misleading
NITI Aayog CEO BVR Subrahmanyam sparked excitement recently by claiming that India is already the world's fourth-largest economy and a $4 trillion economy, citing International Monetary Fund (IMF) data during a press briefing on May 24, 2025. Speaking after the NITI Aayog's 10th governing council meeting themed 'Viksit Rajya for Viksit Bharat', he expressed confidence that India would become the third-largest economy within 2.5 to 3 years, with only the US, China, and Germany ahead. Prime Minister Narendra Modi and several prominent personalities, including Amitabh Bachchan and Anand Mahindra, echoed these claims, sharing graphics attributed to the IMF's April 2025 World Economic Outlook report that appeared to show India overtaking Japan to become the fourth-largest economy. Fact Check: What Does the IMF Data Actually Say? A detailed examination of the IMF's World Economic Outlook (WEO) report released on April 22, 2025, reveals no such official ranking stating India is the fourth-largest economy or that it has surpassed Japan. The 190-page report does not include a ranking chart listing countries by GDP size as circulated on social media. The IMF database provides GDP figures at current prices in US dollars, including estimates for future years. According to this data: India's GDP for the financial year 2024-25 (FY25) was $3.91 trillion. India is projected to reach $4.187 trillion by the end of FY26 (April 2025 - March 2026). Japan's GDP in the calendar year 2024 was $4.03 trillion. Japan's GDP is estimated to be $4.186 trillion at the end of 2025. This indicates that India has not yet overtaken Japan, although projections suggest it could do so by the end of FY26. Currently, India ranks fifth in GDP size, behind the United States, China, Germany, and Japan. Clarifications from Experts Other experts associated with NITI Aayog, such as Arvind Virmani, have stressed that India becoming the fourth-largest economy is a forecast for the end of 2025, not a current fact. Virmani noted the importance of waiting for full-year GDP data before making definitive claims. The IMF itself compiles data based on government statistics and provides projections; it does not independently collect raw economic data. Why GDP Ranking Isn't the Full Picture Even if India surpasses Japan in GDP terms, economists caution against using this metric alone to gauge development or progress. GDP figures do not reflect per capita income, income inequality, or employment levels—key factors in assessing overall economic wellbeing. Conclusion While India's economic growth is strong and the country is on track to climb the global GDP rankings, the claim by NITI Aayog CEO BVR Subrahmanyam that India is already the fourth-largest economy and a $4 trillion economy is premature and misleading when citing IMF data. India remains the fifth-largest economy as per the latest official figures, with projections indicating it may become fourth by the end of the 2025-26 fiscal year.
Hans India
6 days ago
- Business
- Hans India
India's rise to 4th largest economy will boost manufacturing, MedTech: AiMeD
New Delhi: With India on the brink of becoming the world's fourth-largest economy, the milestone will boost the country's manufacturing and medical technology sector, according to the Association of Indian Medical Device Industry (AiMeD) on Tuesday. NITI Aayog on Monday said India is set to become the fourth largest economy in the world by overtaking Japan by the end of 2025. The International Monetary Fund (IMF), in its World Economic Outlook (WEO) report released in April, said that India is expected to be the fourth largest economy in the world with a GDP of $4.19 trillion in 2025, ahead of Japan. For the medical devices sector, the achievement will boost indigenous manufacturing and self-reliance, said Rajiv Nath, Forum Coordinator of the AiMeD. 'A growing economy allows us to scale up R&D, invest in new technologies, and become globally competitive,' Nath said. 'The recognition of India as a top-tier economy will boost investor confidence, drive global partnerships, and open doors for Indian manufacturers to lead not only in volume but in innovation and quality,' he added. The World Economic Outlook (WEO), released by the IMF in April showed that India's GDP for the full year 2025, would become higher than that of Japan. As per IMF data, India's per capita income doubled to $2,880 in 2025 from $1,438 in 2013-14. The country's nominal GDP for 2025 (FY26) is expected to be $4.187 trillion marginally more than the likely GDP of Japan -- estimated at $4.186 trillion, the IMF said. Calling it a moment of immense national pride and global recognition, Nath said the milestone marks India's transition from being seen as an emerging economy to becoming a global economic powerhouse. 'Japan has historically been a symbol of industrial excellence and discipline, and to surpass such a formidable economy signals India's growing economic maturity, expanding influence, and increasing role in shaping global narratives. This isn't just about the numbers -- it's about momentum, demographic strength, and the vast untapped potential of India's young and dynamic population,' said Nath. Nath also emphasised shifting the focus toward improving per capita income, enhancing the quality of life, and creating inclusive growth. 'We must ensure that this economic rise translates into meaningful development at the grassroots level, across rural and urban India alike,' he added.
Time of India
6 days ago
- Business
- Time of India
India's economy may overtake Japan soon, but with caveats
India is set to become the world's fourth-largest economy by the end of 2025 (FY 2025-26), according to the International Monetary Fund's (IMF) World Economic Outlook (WEO) report released in April. A few years ago, India overtook the United Kingdom to become the fifth largest, and is now well on its way to rise to the fourth spot in the list of the top 10 largest economies in the world by overtaking Japan. In just 11 years, India has surged from the world's 10th to the 4th largest economy — a remarkable trajectory driven by sustained growth and strategic reforms under the NDA government. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 이미지로 기억하면 영어가 쉬워진다! 40분 특강 무료 공개 스티븐영어 지금 시작하기 Undo ALSO READ: India to become 4th largest economy by end of 2025: NITI Member Arvind Virmani India's growth numbers have triggered premature celebrations, as there is more to it than meets the eye. Live Events India is set to become the world's fourth-largest economy this year, but with the world's largest population, its per capita GDP remains strikingly low at just $2,880, according to the IMF — far behind China's $13,690 and Japan's $33,960. Gross Domestic Product (GDP) per capita is a key economic indicator that measures the average economic output (or income) per person in a country. Economists use GDP per capita to determine the prosperity of countries based on their economic growth. India doesn't even rank in the top 100 countries when it comes to GDP per capita, not even in the Purchasing Power Parity or PPP rankings. A large population (1.4 billion) dilutes the gains of the GDP doubling. Also, informal employment ( approximately 90% of workforce) and low female workforce participation (26% vs. global 47%) limit per capita gains, says Sachchidanand Shukla. Still, the per capita income has close to doubled over the last 10 years. 'That is keeping pace with the overall GDP growth as the population growth is slowing down with fertility rates going close to the replacement rate of 2.2. However, there are regional disparities owing to differential population growth rates as well as the pace of economic development,' says Ranen Banerjee. The brighter picture in 5 points: In 2025, India will become the 4th largest economy in the world, in nominal GDP terms, overtaking Japan, and will be behind only the US, China, and Germany. India's nominal GDP has more than doubled from 2014 to 2025 (projected). It's a growth of 105% in just a decade. In 2025, India will also become a $4 trillion economy. India was the 10th largest world economy in 2014 - come 2025 it will be the 4th largest - a six places jump in rankings in just 11 years. In a world of increasing global economic uncertainties, and amidst geopolitical conflicts and Donald Trump's tariffs, India will still retain the tag of being the fastest growing major world economy with a GDP growth rate of 6.2% for 2025. India achieved an average annual growth rate of 6.7% from 1990–2023 & in fact outpaced the US (3.8%), Germany (3.9%), and Japan (2.8%). What lies ahead? India will realise its dream of becoming a $5 trillion economy in 2027 and the world's third largest in 2028 by overtaking Germany. But to be on the path of stable and sustained economic growth, experts stress on the need for continuous reforms. PwC's Ranen Banerjee advocates for reforms that enable private enterprise to do business without the fear by decriminalising regulatory compliances with application of technology to support in compliances. 'Enabling exports through common facilities for quality outputs by MSMEs and continued investment in infrastructure to bring down logistics cost and enhance evacuation capabilities will be needed,' he adds. L&T's Shukla says, 'Going forward India will need to undertake deep agricultural reforms, labour reforms, education & skilling at a scale along with judicial administrative & police reforms,' he says. Radhika Rao of DBS Bank sees the need to focus on employment generation. 'Wheels of the structural engine will require to be oiled by keeping the development and reform agenda on track. Quality of growth is also likely to improve as macro balances remain in check alongside a changing trade composition. Lifting employment generation and by extension boosting incomes will be the vital objective for the administration in the rest of its term,' she says. There's no question that India ranks as one of the most crucial markets worldwide, including for major powers like the US and China. Over the past 11 years, political stability at the central government and ongoing reforms have strengthened global investor confidence. However, for the benefits of this growth to reach the broader population, it's essential to focus on creating ample employment opportunities for young people and building a robust manufacturing sector to ensure sustained, stable, and dependable economic progress. (With TOI inputs)
