Gross domestic product (GDP)—the total value of goods and services produced by a country in a given period—-is a key metric for assessing the health of an economy. The conventional approach for measuring a country’s GDP is the expenditure method, wherein the total is derived by aggregating expenditure on fresh consumer goods, new investments, government outlays, and the net value of exports. According to this GDP metric, the US, China, Japan, Germany, and India are the five largest economies in the world.
The GDP of India was $2 trillion in 2014. Eight years later, India overtook the UK to become the world’s fifth-largest economy with a GDP of $3.65 trillion. Economists expect the GDP of India to cross the $26 trillion mark by 2047. India is also aiming to translate GDP growth into social-economic growth as it expects to become a middle-income country by then.
To start with the lowest rungs of society, improvements in health, education, and standard of living lifted 13.5 crore Indians out of multidimensional poverty in just five years. To be specific, India recorded a steep decline in the number of multidimensionally poor from 24.85% to 14.96% between 2015-16 and 2019-21, according to a NITI Aayog report published in July 2023.
GDP growth, a measure of economic progress, has accelerated, registering a 7.6% expansion over the 12 months leading up to Q3 2023, compared to a 7% annual growth in 2022. This blog will discuss the current state of India’s economy and how the economic growth story will pan out in the coming years.
India’s GDP growth and projections
India’s economy is acknowledged to be the fastest-growing large economy by major multilateral organizations, including the IMF.
The GDP of India is expected to expand at around 7% in 2024, according to the RBI’s Monetary Policy Committee. The UN estimates that the GDP of India will grow by 6.2% in the same period. Consulting firm Deloitte sees the country’s GDP growth to range between 6.9% and 7.2%.
Furthermore, the India growth story is expected to accelerate as the World Bank and E&Y expect India to become a $26 trillion economy by 2047.
In short, India, a relatively young country is doing extremely well economically and rising through the ranks to achieve the middle-income status by 2047.
India’s current economic status
India has seized the crown of the fastest-growing G20 economy. According to the Ministry of Statistics, the GDP of India is expected to grow by a robust 7.3% in the financial year 2023-24. Furthermore, India is projected to maintain its position as the world’s fifth-largest economy till 2025, when it is expected to overtake Japan to occupy the fourth position.
Truth be told, the investments in physical and digital infrastructure, tax reforms like GST, industrial policies, and social inclusion initiatives have positioned India for higher and sustainable growth.
The economic and policy reforms and a young population provide a long runway for improving productivity at a pace faster than wage growth. A competent workforce enhances the global competitiveness of enterprises doing business in India.
Key enablers for India’s growth
The Indian economy can be described as a Goldilocks economy. A Goldilocks economy is one that is not too hot, not too cold, and thus is in a perfect state to sustain market-friendly economic policies.
For India, this phase is almost here. The inflation is starting to moderate and domestic demand is picking up. If estimates are to be believed, the Indian economy will grow around 7% in FY 2024-25 as well.
- World’s IT and services hub
India has become a byword for global IT outsourcing as the country has demonstrated its tech prowess in IT-allied and BPO services. Global corporations are leveraging Indian technology talent through their capability centers in India, which employs 5 million people. India is well-positioned to cash in on this success and take up more skill-intensive and increasingly digitized services.
- Digitalization: A force multiplier
India’s digital adoption journey has been amazing. The country had the world’s second-largest internet population at over 1.2 billion users in 2023. Of these, 1.05 billion users accessed the internet via their mobile phones.
The astonishing numbers testify to the deep penetration of mobile telephony and the internet. Along with this, the government’s focus on developing digital infrastructure has laid the foundation for a digital economy.
Digital reforms in India are now the global benchmark for most countries and provide a competitive advantage for growing businesses. The large-scale adoption of the Unified Payments Interface (UPI) or digital payments by 260 million unique users has accelerated the formalization of the digital economy.
- Filling the credit gap to fuel growth
India has room to increase its total debt vis-a-vis the size of the economy. The Indian enterprise debt market is largely served by corporate bonds and banks, but there is still unmet demand for enterprise debt. India has a tremendous runway for increasing leverage to drive growth by filling the credit gap, i.e., 200 to 300 bps incremental annual GDP growth for the next 20 to 30 years.
- Thriving entrepreneurship spurred by private capital
The ease of doing business in India has improved. The results are readily visible in the country’s thriving start-up ecosystem. The India stack of digital assets and digital public goods and services has laid a sound foundation, on which the start-up businesses are innovating and growing. It is the development of this digital infrastructure that has fueled much of the growth of start-ups in India. The availability of private capital from venture capital firms and private equity funding has incentivized the boom in start-ups.
- Reaping the demographic dividend
The size and age of India’s workforce will boost its economic growth in the coming years. The share of India’s working-age population to the total population will reach its highest level at 68.9% by 2030. By the year 2030, India’s dependency ratio is projected to reach its lowest point at 31.2%. With a relatively young population (median age of 28.4 years), India has a competitive advantage in terms of workforce and an opportunity to unleash the consumption power of a young population.
- Making domestic manufacturing competitive
Disruptions during the pandemic and geopolitical conflicts forced several global firms to diversify their supply chains. Recognizing this as a great opportunity to establish itself as a manufacturing hub, the government of India launched several initiatives including ‘Atmanirbhar Bharat’ (self-reliant India).
Growth in manufacturing would help create new job opportunities for 43% of the country’s population dependent on farming for livelihood. Manufacturing growth also drives investments in infrastructure to move goods quickly and efficiently besides spurring further growth in services.
Success in complex, high-value, and emerging sectors would position India as a manufacturing hub catering to both domestic and global markets.
- Building infrastructure
Acceleration in infrastructure investment, especially transportation and logistics, is directly boosting growth while steadily improving competitiveness for enterprises. After massive upgrades in roadways, the focus is now on rail, air, and water transport along with the ‘Gati Shakti’ initiative which is aimed at improving intermodal visibility and synergies.
- Transition to sustainable energy
Rising global temperatures and associated climate changes pose a big risk to the global economy, but also present an opportunity to develop businesses related to new sources of energy. Recognizing the importance, the government of India has set itself an ambitious target to be net zero by 2070 and reduce carbon intensity by 45% by 2030 vis-à-vis the 2005 levels.
India’s economic performance, according to IMF
The International Monetary Fund’s (IMF) growth forecast for the GDP of India is in line with that of other international and domestic agencies. IMF has pegged the current 2024 GDP of India at $4.11 trillion and has quoted the current real GDP growth at 6.3%.
The IMF’s commentary on the GDP of India highlights the fact that the Indian economy is showing robust growth. The present employment level has surpassed the pre-pandemic level and, while the informal sector continues to dominate, formalization has made progress.
Globally, India’s 2023 G20 presidency has demonstrated the country’s vital role in advancing multilateral policy priorities.
Growth is expected to remain strong, supported by macroeconomic and financial stability. Real GDP is projected to grow at 6.3 percent in FY2023/24 and FY2024/25. Inflation is expected to gradually decline to the expected target level although it remains volatile due to food price shocks.
India’s GDP comparison with other countries
India is on course to emerge as the world’s fourth-largest economy in 2025, overtaking Japan. The data table compiled by the IMF shows how India stacks up against other leading economies.
|GDP (USD trillion)
Data source: International Monetary Fund
The Indian economy is on track to achieve an annual growth rate of 6% or more, according to estimates by the RBI, the IMF, and corporate firms like Ernst & Young and Deloitte. The GDP of India is showing robust growth and the country is set to achieve middle-income status by 2047 with a GDP of $26 trillion.
What is India’s GDP today?
India is the fifth largest economy in the world. India’s gross domestic product (GDP) has touched the $3.73 trillion mark in 2024, up from about $2 trillion in 2014.
Is India in the top 5 countries with the highest GDP?
India holds the fifth position in the list of the world’s leading global economies. The Gross Domestic Product (GDP) serves as a crucial indicator of a nation’s economic health.
What is India’s current GDP rank?
In terms of GDP, India is currently ranked fifth.
Which country has the highest GDP?
According to the most recent data from the World Bank, the US is currently the world’s largest economy, with a GDP of $26.9 trillion as of 2024.