Economic Brilliance in the Shadow of Tensions
India overtakes Japan to become the world’s fourth-largest economy; resilience built on policy continuity, investment and reform
By Sanjeev Oak
India has crossed a historic milestone. Surpassing Japan, it is now the world’s fourth-largest economy, with GDP estimated to have moved past $4 trillion. For many, this is not just a ranking shift; it is an affirmation of a decade marked by policy consistency, intent and strategic vision. The conviction is growing that India will not only be an economic heavyweight but will also be counted among the world’s foremost strategic leaders in the coming decade.
“India is not merely No. 4; it is positioning for global leadership — economic as well as strategic.”
This ascent has unfolded under the shadow of heightened security tensions. The terrorist attack in Pahalgam shocked the country; India’s calibrated response — ‘Operation Sindoor’ targeting terror bases across the border — was more than a military action. It was a firm assertion of sovereignty. Such episodes can unsettle social and economic stability. Yet, even in this fraught period, India has held its economic poise and taken a decisive leap on the global stage.
Crossing a milestone
India’s climb past Japan was anticipated by the International Monetary Fund in its World Economic Outlook. That projection has now crystallised. The IMF pegs India’s growth for 2024–25 at 6.8%, outpacing China, with global institutions — the World Bank, Moody’s, Fitch, and S&P — citing a trio of drivers: a robust services base, a construction boom, and notable gains in manufacturing.
“A decade of decisive decisions has translated into durable growth momentum.”
The shift is structural. Once identified primarily as one of the BRIC economies, India is increasingly the pivot of global supply chains — converting the dislocations from China’s slowdown and the US–China trade war into strategic opportunity.
Security headwinds, steady macro
India–Pakistan tensions are hardly new — four wars since 1947 and countless skirmishes bear witness. But recent years, particularly after attacks such as Pulwama, Uri and Pahalgam, have seen a firmer, results-oriented stance on terrorism. Even as India has displayed military resolve, it has shielded its macro-economy, refusing to let security shocks derail growth or investment.
“Fighting terror while keeping the growth curve intact is no small feat — India has done both.”
Investment flows defy the ‘war economy’ stereotype
Conventional wisdom says conflict deters capital. India has upended that logic. In the past five years, its Ease of Doing Business rank improved from 142 to 63, signalling institutional confidence. Since 2000, cumulative FDI has neared $1 trillion; in 2023–24 alone, inflows touched $71.2 billion, with manufacturing FDI up 69% — a marker of rising productive capacity.
The shift is powered by the China + 1 recalibration in boardrooms worldwide, and underpinned by Make in India, Production-Linked Incentive (PLI) schemes and an unprecedented capital expenditure push: the 2024–25 Union Budget earmarked ₹11.11 lakh crore for capex. This spend is flowing into roads, airports, ports, water, energy and railways, feeding a virtuous cycle from job creation to capacity expansion.
“From a ‘back-office’ nation to a factory floor in the making — that is India’s manufacturing pivot.”
From services powerhouse to production platform
While services remain the backbone, the production surge is unmistakable. India is scaling up in mobiles, electronics, pharmaceuticals, solar equipment and semiconductors. PLI has catalysed capital formation; modern logistics corridors, industrial nodes, faster clearances, tax incentives and greater transparency are drawing multinationals to manufacture at scale.
Reform and the digital rails
Resilience has also flowed from policy plumbing: GST, Insolvency and Bankruptcy Code, bank consolidation, and a sweeping digitisation agenda. UPI, launched in 2016 and now a global reference point, has transformed payments. Paired with RuPay, Jan Dhan and the Digital Health Mission, it has expanded everyday participation in the formal economy and deepened inclusion.
“UPI is India’s crisp answer to doubts about the viability of large-scale digital public goods.”
These reforms have made transactions faster and cleaner, cut leakages, and strengthened trust among domestic and global investors alike. The outcome is not just top-down growth; it is broad-based, bottom-up expansion.
Defence self-reliance and strategic autonomy
Amid a turbulent world order, India is pushing Atmanirbhar Bharat in defence — not only in weapon systems but across ships, aircraft, drones, radars and mission-critical software. Reducing import dependence while nurturing domestic capacity enhances strategic autonomy and reinforces India’s image as a prudent yet prepared power.
The macro context — and the outlier
Global shocks — Covid-19, the Ukraine–Russia war, and US–China trade frictions — have scarred most economies. Yet India has remained comparatively stable. In 2023–24, global GDP growth was about 3.2%; China grew 5%, the US 2.5% — and India clocked a robust 6.8%. The differential speaks to policy discipline and demand resilience.
“Ranking fourth is not a statistical blip; it is a reaffirmation of capacity — and of opportunity.”
What the fourth place means
Becoming the fourth-largest economy is more than a headline. It signals credibility, scale and runway. Between 2014 and 2024, India has deliberately shifted from being seen as a merely “emerging market” to a nation prepared for leadership — economically and strategically. The path ahead demands the same triad that powered the rise: consistency, clarity and courage.
India’s task now is to lock in the gains: sustain capex, deepen manufacturing ecosystems, keep reforms moving, and ensure inclusion keeps pace with growth. If it does, the milestone of No. 4 will be a waypoint, not a destination — a launchpad towards a developed India.
“Even in the shadow of tension, India’s economic sheen endures — and brightens.”
As the global marketplace searches for anchors of stability, credibility and progress, India is increasingly the default choice. The trajectory from here will determine not just India’s share of global GDP, but its voice and weight in shaping the next world economy.