India’s ascent: Overtaking Japan in a shifting global order

The global economic landscape is witnessing a profound shift, one that echoes the dystopian warnings of George Orwell’s 1984 about the manipulation of truth and power dynamics, albeit in a different context. In a moment of professional enthusiasm, the Chief Executive Officer of NITI Aayog, India’s premier policy think tank tasked with transforming the nation, announced that India had surpassed Japan to become the world’s fourth-largest economy, trailing only the United States, China, and Germany. This claim, however, was premature, as NITI Aayog member Arvind Virmani clarified that the milestone is expected to be achieved by the end of 2025. According to the International Monetary Fund’s (IMF) World Economic Outlook from April 2025, India’s nominal GDP is projected to reach $4.187 trillion, narrowly surpassing Japan’s $4.186 trillion. This development marks a significant moment in India’s economic journey, reflecting decades of sustained growth, but it also underscores the stark disparities between the two nations and the broader global economic narrative.
India’s rise to the fourth-largest economy is a testament to its resilience and growth over the past three decades, a trajectory that began to gain international recognition following the liberalization reforms of 1991. In July of that year, then-Finance Minister Manmohan Singh, invoking Victor Hugo’s famous words—“no power on Earth can stop an idea whose time has come”—told Parliament that India’s emergence as a major economic power was an idea whose time had arrived. Singh’s vision gained historical validation through the work of British historian Angus Maddison, whose seminal study, The World Economy (OECD, 2003), highlighted the historical prominence of China and India. Maddison noted that in 1700, these two nations accounted for nearly half of global income, a position eroded by two centuries of colonialism and the Industrial Revolution’s focus in Europe. His study kindled hope in Asia that the 21st century would mark the resurgence of these ancient economies, potentially heralding a new Asian century.
This hope has been partially realized, though the paths of China and India have diverged. China’s ascent was more rapid, overtaking Japan in 2010 to become the world’s second-largest economy, a milestone achieved in the wake of the 2008-09 transatlantic financial crisis, often referred to as the global financial crisis. At the time, Japan’s GDP stood at $5.474 trillion, but China’s rise—bolstered by its export-driven model and massive infrastructure investments—sent shockwaves through Japan. The event marked a turning point in China’s global rise, reducing the economic gap with the United States and relegating Japan to third place. Japan, already grappling with a decade of low growth and low expectations, was jolted by this development. The return of Shinzo Abe as Prime Minister in 2012, after a brief first term in 2006-07 cut short by health issues, was partly a response to Japan’s yearning for a strong leader to revive its economy. Abe’s “Abenomics” program, with its “three arrows” of aggressive monetary easing, liberal fiscal policy, and structural reforms, aimed to enhance productivity and growth, offering Japan a glimmer of hope despite its demotion in global rankings.
Japan’s challenges, however, persisted. The exit of Abe, followed by lackluster leadership and the economic uncertainties posed by the return of U.S. President Donald Trump, have once again depressed Japan’s outlook. More recently, Germany overtook Japan, claiming the third spot with a nominal GDP of $4.74 trillion in 2024, pushing Japan to fourth place. The IMF projects Germany’s GDP to reach $5.251 trillion by 2028, but its growth is expected to stagnate, with zero growth in 2025 and a modest 0.9% in 2026, reflecting the impact of global trade tensions. Japan, meanwhile, faces muted growth of 0.6% in both 2025 and 2026, hampered by an aging population, stagnant productivity, and a global trade slowdown that weighs heavily on its export-driven economy. It is against this backdrop of a slowing Japan and a decelerating Germany that India is poised to overtake Japan by the end of 2025, a development that underscores the shifting dynamics of the global economic order.
The IMF’s projections highlight the narrow margin between India and Japan, with India’s nominal GDP at $4.187 trillion compared to Japan’s $4.186 trillion. However, the vast disparity in per capita GDP tells a more nuanced story. Japan’s per capita GDP stands at $33,900, reflecting its status as a developed, industrial, and trading power, albeit one grappling with an aging population.
In contrast, India’s per capita GDP is a modest $2,880, marking it as a low-middle-income, developing economy. Despite this gap, India’s demographics—a youthful population and a rapidly expanding middle class—position it for sustained growth. The IMF forecasts India to maintain a growth rate above 6% over the next two years, with a projected 6.2% in 2025, driven by private consumption, particularly in rural areas. This growth trajectory is expected to propel India past Germany by 2028, with a GDP of $5.584 trillion, making it the third-largest economy globally. India is also anticipated to cross the $5 trillion mark by 2027, with a GDP of $5.069 trillion, a milestone that would further solidify its position.
The response in Japan to India’s rise has been notably subdued, a stark contrast to the widespread concern that accompanied China’s ascent in 2010. When China overtook Japan, it was viewed as both an economic competitor and a geopolitical rival, particularly in global trade, where Japan’s export-dependent economy felt threatened by China’s growing dominance. India, however, is seen as an opportunity rather than a challenge. Good diplomatic and economic relations between India and Japan, coupled with the absence of direct competition in global trade or geopolitics, have contributed to this benign reaction. Reports from Japan indicate little news coverage and no significant expression of concern, reflecting a perception that India’s rise does not pose the same existential threat that China’s did. While China’s emergence as a global trading power was a wake-up call for Japan, India’s economic ascent is viewed through a more collaborative lens, with potential for mutual benefit rather than rivalry.
Nevertheless, the global economic rankings remain fluid, influenced by exchange rate fluctuations, trade dynamics, and the seasonal performance of economies like India, Japan, and Germany. The narrow gap between these three nations suggests that their positions could shift in the short term. If India sustains its growth and crosses the $5 trillion mark in the coming years, it could create a more substantial distance from Japan and Germany, securing its place as the third-largest economy for the foreseeable future. However, the distance to China, with a nominal GDP of around $19.231 trillion in 2025, remains vast, and catching up with the United States, at $30.507 trillion, is a far-off prospect. The U.S. and China are locked in a race for economic and geopolitical influence, leaving India to focus on its own path—sustaining an inclusive growth process that enhances competitiveness and improves the lives of its citizens.
India’s ascent, while a moment of pride, must be tempered with a focus on the quality of growth. The vast per capita GDP gap with Japan underscores the challenges of inequality, underinvestment in research and development, and the need for structural reforms to ensure long-term sustainability. As India moves toward becoming a $5 trillion economy, it must prioritize inclusive development, addressing disparities to ensure that economic growth translates into tangible improvements in living standards. In a world where Orwellian themes of surveillance and truth manipulation loom large in political discourse, India’s economic rise offers a chance to redefine global narratives—not through control, but through collaboration and resilience, ensuring that the idea of India as a major economic power, as Manmohan Singh envisioned, truly comes to fruition.
(the writer can be reached at dipakkurmiglpltd@gmail.com)
Dipak Kurmi