India is on track to become the fourth-largest economy globally by the end of the fiscal year 2025-26, according to the International Monetary Fund’s (IMF) World Economic Outlook report released in April.

The country surpassed the UK from to take the fifth spot a few years ago and is set to overtake Japan for the fourth position, securing high position from being the 10th largest economy just 11 years ago.

Despite its GDP growth, India’s per capita GDP remains low at US$2,880, lagging behind China’s US$13,690 and Japan’s US$33,960. Experts link these modest per capita figures to India’s large population of 1.4 billion.

Informal employment makes up roughly 90% of the workforce, and low female workforce participation stands at 26%, compared to the global average of 47%.

🔗 Source: The Economic Times

🧠 Food for thought

1️⃣ India’s remarkable reversal of colonial economic decline

India’s projected rise to become the world’s fourth-largest economy represents a significant reversal of historical decline during the colonial period.

The country’s share of global income plummeted from 22.6% in 1700 to just 3.8% in 1952 following independence, reflecting the devastating economic impact of colonial rule and deindustrialization1.

This historical context makes India’s current economic trajectory even more remarkable. The economy has steadily accelerated over five decades, with average growth rates increasing from 4.4% in the 1970s-1980s to 7.1% in the last decade2.

The economic liberalization that began in the 1990s marked a crucial turning point, shifting away from the heavily regulated “license raj” system that had stifled growth and innovation for decades1.

India’s growth pattern has become notably more stable since these reforms, with the economy demonstrating resilience during major disruptions like demonetization and GST implementation2.

2️⃣ The GDP-per capita paradox reveals structural economic challenges

India’s ascent to becoming the fourth-largest economy masks significant structural challenges that limit how this growth translates to improved living standards.

With GDP per capita at approximately $2,880 compared to Japan’s $33,900, India doesn’t even rank among the top 100 countries in per capita terms, highlighting the dilution effect of its 1.4 billion population3.

This disparity is exacerbated by wealth concentration. The top 1% of India’s population currently holds over 40% of national wealth, creating one of the world’s deepest economic divides3.