India’s Economic Leap: Journey to the World’s Fourth Largest GDP -

In a remarkable journey of transformation, India has emerged as the fourth-largest economy in the world by Gross Domestic Product (GDP), surpassing traditional economic giants like Japan and Germany in recent years. This economic milestone is not just a testament to numerical growth, but a reflection of the structural, demographic, and policy-driven changes that have reshaped India’s economic landscape over the past three decades.

The Liberalization Breakthrough

India’s path to economic ascendancy began in earnest with the 1991 economic liberalization. Faced with a severe balance of payments crisis, the Indian government under Prime Minister P.V. Narasimha Rao and Finance Minister Dr. Manmohan Singh introduced sweeping reforms. These included deregulating industries, reducing import tariffs, devaluing the rupee, and encouraging foreign direct investment (FDI). These policies dismantled the “License Raj” and laid the foundation for a market-oriented economy.

The liberalization process opened the gates for multinational corporations, boosted exports, and introduced competition that spurred innovation and efficiency across sectors. India’s service sector, particularly in Information Technology (IT) and business process outsourcing (BPO), became a global powerhouse, driven by a highly skilled, English-speaking workforce.

Demographic Dividend and Consumption Growth

India’s population, once seen as a challenge, turned into one of its greatest assets. With over 65% of its population under the age of 35, India enjoys a demographic dividend that fuels both labor supply and domestic consumption. Rising incomes, urbanization, and access to credit have significantly increased household spending, contributing to GDP growth.

The expansion of the middle class has boosted demand in sectors like housing, automobiles, education, healthcare, and technology. E-commerce and digital payments have exploded in popularity, further formalizing the economy and enhancing productivity.

Digital and Financial Infrastructure

Over the past decade, India has made significant investments in digital infrastructure. The launch of the Aadhaar biometric identification system enabled efficient delivery of subsidies and government services. The Digital India initiative connected millions to the internet and mobile banking, promoting financial inclusion.

The Unified Payments Interface (UPI), introduced in 2016, revolutionized digital payments, making transactions instant, secure, and widely accessible. This leap in fintech has integrated rural and urban markets, encouraged entrepreneurship, and reduced the dependence on the informal cash economy.

Policy Reforms and Government Initiatives

Successive governments have undertaken bold reforms aimed at simplifying the business environment. The introduction of the Goods and Services Tax (GST) in 2017 created a unified tax structure across states, replacing a complex web of indirect taxes. The “Make in India” initiative, rolled out in 2014, aimed to boost manufacturing and attract global investment, especially in electronics, automobiles, and defense.

Additionally, the Insolvency and Bankruptcy Code (IBC) has improved the ease of doing business by streamlining the process of debt recovery and corporate restructuring. India’s rankings in the World Bank’s Ease of Doing Business index improved significantly as a result of such measures.

Strong Domestic Market and Export Performance

India has a large and diversified economy, with strong contributions from agriculture, industry, and services. While the services sector continues to dominate, manufacturing and exports have also grown steadily. India is a major exporter of pharmaceuticals, textiles, and software services. The growth of startups and innovation hubs in cities like Bengaluru, Hyderabad, and Pune has positioned India as a global technology center.

During global disruptions such as the COVID-19 pandemic and the Russia-Ukraine war, India displayed economic resilience. Strategic crude oil imports, robust agricultural output, and a recovering industrial base allowed India to navigate supply chain shocks better than many other economies.

International Trade and Strategic Partnerships

India has also played an increasingly active role in global economic and diplomatic forums like the G20, BRICS, and the QUAD. Free trade agreements and strategic partnerships with countries in Europe, Asia, and North America have opened new markets for Indian goods and services. India’s positioning as a democratic, stable alternative to China in global supply chains has also attracted foreign investment.

Challenges and the Road Ahead

Despite this impressive ascent, India still faces challenges such as income inequality, unemployment, and regional disparities. Infrastructure gaps, bureaucratic hurdles, and reliance on monsoons for agriculture continue to pose structural issues. Climate change and sustainability are also emerging as critical areas requiring urgent attention.

To sustain its position and aim higher, India must continue investing in education, skilling, green energy, and innovation. Ensuring inclusive growth and building resilience to global economic shocks will be key to maintaining momentum.

Counter Point

While India’s claim of becoming the fourth-largest economy in the world has generated national pride and international attention, several news sources caution that these claims must be critically reviewed. According to Alt News, the assertion made by NITI Aayog CEO B.V.R. Subrahmanyam was premature and based on projections rather than **current, confirmed data. The IMF’s database, while forecasting India’s economic growth trajectory, did not yet list India ahead of Japan in its latest official figures at the time the claim was made. The Independent also highlighted that the celebration might be more symbolic than substantive, as it lacked alignment with officially published figures from recognized global financial institutions.

Moreover, The Wire points out that GDP figures alone don’t capture the broader picture of a country’s economic well-being. While India’s overall economy may be expanding, it still faces deep-rooted issues such as income inequality, underemployment, and regional disparities. The article argues that for a large segment of the population, this economic growth remains a “mirage,” as it has not translated into proportional improvements in living standards or access to basic services. Hence, while the numerical milestone is notable, it is essential to balance celebration with scrutiny, ensuring that headline figures reflect real, inclusive progress on the ground.

Conclusion

India’s rise to the 4th largest economy is a story of resilience, reform, and reinvention. Through liberalization, digital innovation, and demographic energy, India has carved a new role for itself in the global economy. With the right policies and sustained effort, the world’s largest democracy is poised not just to grow in size, but in stature, influence, and equity.

Sources:

More Current Affairs: https://learnproacademy.in/updates/