By focusing on GDP, India misses the point

With a GDP of more than $4 trillion, India has overtaken Japan as the world's fourth-largest economy, Indian policy think tank NITI Aayog has claimed, citing International Monetary Fund data. It added that if India continues to tread the current development path, it is likely to become the world's third-largest economy in the next two to three years.

But as some US media outlets said, despite India's nominal GDP inching closer to Japan's in 2024, the country is still slightly behind the East Asian country's economy, according to current IMF estimates, with the leapfrogging expected to happen later this year.

Some Indian media outlets, too, pointed out that according to the IMF's World Economic Outlook report, issued in April, India's GDP is expected to reach $3.91 trillion in fiscal year 2025, while Japan's GDP for the 2024 calendar year is likely to be $4.03 trillion. Hence, India is yet to become the world's fourth-largest economy.

According to the IMF, India is expected to surpass Japan in fiscal year 2026, when its GDP is expected to reach $4.187 trillion, marginally higher than Japan's $4.186 trillion. It is worth noting that the IMF calculates India's GDP data based on the April-to-March fiscal year, and GDP of countries like Japan on the basis of a calendar year (January to December).

This means in the IMF's statistical system, India's fiscal year 2024-25 (April 2024 to March 2025) is marked as "2024", while the Indian government refers to it as "fiscal year 2025". So, according to the IMF, India's GDP is expected to surpass Japan's after the 2025-26 fiscal year (that is, by March 2026).

The IMF has also said that due to escalating trade tensions and increasing global uncertainties, India's economy will likely grow by 6.2 percent in 2025-26, lower than the previous estimate of 6.5 percent.

However, on Aug 15, 2023, Indian Prime Minister Narendra Modi delivered a speech to mark the 76th anniversary of India's independence, saying India's "unprecedented economic development" in the next five years will make it the world's third-largest economy — after the United States and China. And on April 14 last year, he proposed to make India a "developed country" and a global manufacturing hub by 2047, while promising to increase social spending and improve infrastructure.

According to the World Bank, a country with per capita income of more than $14,005(2024-25) is regarded as a high-income or developed country. India has the potential to become a high-income country by 2047, when its GDP is likely to reach $30 trillion.

Although the prospects of India's long-term growth are high, the Indian think tank's claim that India has overtaken Japan as the world's fourth-largest economy appears to be made in haste. An important reason why the jump-the-gun announcement will catch Indians' attention is that it was made amid rising jingoism in the country, apparently fueled by some politicians in New Delhi in a bid to show that the Modi government has made the best of its strained relations with Pakistan.

New Delhi should realize, as some cool-headed Indian observers have said, that its real challenge is to increase per capita GDP, which is about $2,500 compared with Germany's $54,343, instead of boasting of becoming the third-largest economy by overtaking Germany's total GDP.

What India needs is pragmatism, along with a stable and peaceful development environment. As long as Indian decision-makers translate their vision into real action, the country, with its huge young population, will unleash its full growth potential.

But the country should pursue qualitative and sustainable development, instead of quantitative growth, and ensure everyone gets justice, and national wealth is equitably distributed.