India may soon become the third-largest economy in the world. But there is more to it

In a remarkable development, India, one of the fastest-growing major economies in the world, is on the cusp of becoming the third-largest economy globally, overtaking Japan in the process. The recent announcement by the CEO of NITI Aayog highlighted that India’s nominal Gross Domestic Product (GDP) has reached approximately $4.187 trillion, putting it just ahead of Japan’s nominal GDP of $4.186 trillion. While the assertion was met with enthusiasm, experts indicate that this transition is likely to materialize within the following months.

Despite this significant shift, it is imperative to note that the disparity in per capita income remains stark. Japan’s per capita GDP stands at around $33,900, an indicator of its developed economy, while India’s per capita GDP is approximately $2,880, classifying it as a low-middle-income economy. These figures underline the broader narrative of India’s economic ascent, juxtaposed with enduring challenges in wealth distribution and economic inclusivity.

The journey of India’s sustained economic growth over the last three decades has been marked by various fluctuations. The foundation can be traced back to the early 1990s when then-Finance Minister Manmohan Singh introduced reforms poised to liberate India’s economy. Referencing Victor Hugo’s assertion that “no power on Earth can stop an idea whose time has come,” Singh encapsulated the budding sentiment that India was on its way to establishing itself as a formidable global economic player.

This perspective gained traction a few years later as British historian Angus Maddison conducted extensive studies that highlighted the recovering fortunes of both China and India. His landmark research, documented in “The World Economy,” illustrated that by 1700, these two Asian nations accounted for nearly half of global income, plummeting only due to colonialism and the Industrial Revolution being largely European-centric. Maddison’s work instilled renewed hope in the Asian narrative, suggesting a future where both India and China would reclaim their historical economic prominence.

China surpassed Japan as the world’s second-largest economy in 2010, a milestone propelled in part by the global financial crisis of 2008-09. This economic restructuring introduced a paradigm shift, leading to a recalibration of power dynamics in the region. In a parallel timeline, Japan had already been grappling with minimal growth and increased stagnation prior to China’s unmistakable rise. The downturn compelled political reshaping, sourcing for a robust leader like Shinzo Abe, whose “Abenomics” sought to rejuvenate Japan’s economy through aggressive monetary policies, fiscal stimulus, and structural reforms.

As Japan transitioned between growth and economic hardships, it finds itself now contending with Germany, which recently overtook Japan to claim the position of the third-largest economy. The current landscape showcases a dynamic and fluid economic race among these three countries, with their standings subject to fluctuations based on economic performance and global market conditions.

Interestingly, the International Monetary Fund’s latest revelations about India’s impending overtaking of Japan have garnered a somewhat muted response in Japan. Unlike the apprehension witnessed when China eclipsed Japan, India’s rise appears to be viewed more as an opportunity than a threat. This perspective is rooted in the diplomatic and economic rapport established between the two nations, as India is not perceived as a direct competitor or geopolitical rival, unlike China.

As the race for global economic standing unfolds, the potential for shifts among India, Japan, and Germany remains robust. Currency exchange rates and seasonal economic performance can cause fluctuations in rankings. If India’s economy continues its trajectory and crosses the evolutionary $5 trillion threshold by 2025, it will not only solidify its position as the third-largest economy but will also sustain a pronounced distance from Japan’s GDP, fostering more substantial growth for its citizens.

However, it’s essential to recognize that attaining the third spot in the economic hierarchy is merely a phase. India’s long-term vision needs to extend beyond surpassing Japan to creating an inclusive growth model that ensures a better quality of life for all its people. As the nominal GDP for China currently hovers around $18 trillion, India must focus on enhancing productivity and ensuring that wealth generation translates into equitable socio-economic advancements.

In a geopolitical environment marked by increasing competition between the United States and China, India, while not directly part of that rivalry, must carve out its niche, emphasizing robust domestic growth strategies aimed at uplifting the living standards of its populace. This inclusive approach will aid in fortifying India’s global economic stature, making it a significant player in the international arena.

In conclusion, as India stands at the precipice of surpassing Japan and advancing to become the world’s third-largest economy, it is crucial to stay grounded in the realities of economic inequality that persist. As we celebrate this anticipated milestone, the foundation for long-lasting development will depend on comprehensive strategies that prioritize not only economic growth but also the well-being of all citizens. In doing so, India can aspire to not only regain its historical economic stature but also embody modern principles of inclusive and sustainable growth, ensuring a brighter future for generations to come.

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