India will likely be the fourth-largest economy in the world in 2025, with a Gross Domestic Product (GDP) of USD 4.19 trillion by overtaking Japan.
This is noteworthy and impressive as the Indian economy’s ranking moved just by two places from 12th to 10th in 2004-2014, but it improved sharply to 5th place in the next decade between 2014 and 2024.
The International Monetary Fund (IMF) recently said India will become the third-largest economy by 2027-28 with a USD 5 trillion GDP.
Some may say no matter what, India’s GDP will become the third largest in the world soon due to arithmetic inevitability, given the size of India’s population.
However, nothing can be taken for granted in today’s world, underpinned by uncertainties and trade wars. So, effort is required to ensure that businesses have an environment to grow and skilled workers are available as per the requirements of the industry.
India is a consumption-driven economy, as reflected by the 55 per cent contribution by private consumption to the GDP. India has the potential and aims to be a high-income country by 2047, signifying a good quality of life for individuals and enabling a vibrant, culturally rich and harmonious society.
Despite facing some challenges due to the disruptions caused by COVID-19 and the increasing interest rates in recent times, India’s consumption story has been a bright spot in the global investing landscape. India is now the world’s most populous nation, with 1.5 billion people, with more than half in the working-age population. This makes consumption a structural story for a long period
India’s per capita income has doubled from USD 1,438 in 2013-14 to USD 2,880 in 2025. Yet, it’s a long journey for the country over the next two decades before India can be counted as ‘Viksit Bharat’ or a developed nation by 2047.
The size of Indian economy is estimated to be USD 30 trillion by 2047. By then, India should have all the attributes of a developed country with a per capita income that is comparable to that of high-income countries. The World Bank defines high-income countries as those whose annual per capita income is more than USD 14,005. Analysts are of the view that India will likely be the third-largest consumer market in the world by 2030.
The transformation of India’s manufacturing sector is essential for India to become a developed nation by 2047, as people transition from agriculture to manufacturing for better employment opportunities.
Going forward, the private sector would have to become competitive based on domestic productivity improvement and create global champions in all the sectors, a hallmark of a developed nation. For this, deregulation also has to make a big contribution as it becomes more important than before.
The industry has to ramp up capital expenditure and raise workers’ compensation in line with profitability growth to achieve over 6.5 per cent economic growth and become a developed nation by 2047.
The increased investment will not only enhance capacity but also create more jobs at greater remuneration, leading to higher household savings and consumption, leading to a virtuous cycle of investment.
India would require a lot of investment in creating capacities, including in infrastructure space, over the next 25 years. Meeting India’s capital needs would require steady growth in household incomes and savings, and this can be possible when their income rises.
In Budget 2025-26, the government announced that a National Manufacturing Mission will be put in place to cover small, medium and large industries for furthering Make in India and increasing the share of manufacturing to 25 per cent of GDP from 15-17 per cent in recent years.
With uncertainty in the world now throwing up huge opportunities for India, the country needs to focus on winning sectors like China did for its manufacturing for decades. As a result, China has placed itself at the heart of the global supply chains, putting it in a position of strength to influence global trade.
Over the long run, sectors linked to technology and clean energy will play a key role in driving sustainable growth. Building resilience through self-reliance in critical minerals, especially in rare earths, can help India move closer to its Viksit Bharat aspirations.
While India has largely been a domestic demand-driven economy, India has to ink Free Trade Agreements (FTAs) with the developed countries as it ramps up production for the world.
India should sign such pacts as soon as possible with the US and the European Union. FTAs will induce and incentivise the global supply chains to come to India. FTAs will not only bring foreign direct investment, they will also bring along management, risk capital, technology and market demand. So, attracting those FDI anchor investors with the supply chain thing is very important. This is what drove the growth of Southeast Asia, including China. So that should be the strategy of India.
Government initiatives to boost private consumption, expand manufacturing capacity and increase infrastructure spending will help offset the weakening outlook for global demand.
Despite global uncertainties, domestic and international agencies, including the IMF and the World Bank, have forecast India will be the fastest-growing large economy in 2025-26. India’s forex reserves have swelled to nearly USD 700 billion, making it only the fourth country in the world to cross the mark, after China, Japan, and Switzerland.
This signifies the country’s growing ability to navigate global economic uncertainties and support its trade and investment needs. India has created infrastructure – highways, railways, airports, and ports – the arteries of a New India, at an unprecedented pace. India is home to the largest school education system and the second-largest higher education ecosystem in the world. The youth are inspired to be job creators. Consequently, India has risen to become the third largest startup ecosystem in the world in the last decade.
Strengthening the Centre-State coordination for shared prosperity is crucial to achieve the dream of a Viksit Bharat. States have to initiate deregulation in key factors of production –land and labour. Ease of doing business should be the mantra.