GDP is the total monetary value of all goods and services produced in a country. It represents the total income generated within the country. When GDP increases, it means the total income has gone up. This income is earned through agriculture, industry, and services. All three sectors contribute to the GDP, and its calculation is only an estimate—there’s no direct measurement of the income of all 1.46 billion people in India.
If we divide the GDP by the total population, we get per capita income, which is the average income per person. More important than the total GDP is how much the average person earns. However, average income doesn’t mean everyone earns the same. Since both rich and poor are included in the population, the increase in GDP may just mean the rich are earning more. Even if the poor don’t see an increase in income, the GDP and per capita income may still rise. So it matters whose income is actually increasing. Also, GDP is calculated based on the market value of goods and services, so if prices rise due to inflation, GDP can look higher even if actual income levels haven't improved.
Recently, NITI Aayog announced that India has overtaken Japan in terms of total GDP, becoming the fourth-largest economy in the world. According to NITI Aayog, India’s GDP is $4.187 trillion, while Japan’s is $4.186 trillion—a difference of just $100 billion. They also say India might surpass Germany in the next two to three years.
But this claim is a bit controversial. The International Monetary Fund (IMF), in its April 2025 report, does not list India as the fourth-largest economy. Even their GDP estimates for 2025 are still just projections. True figures will only be known at the end of the year. Japan’s 2025 GDP figure is also an estimate. So we will have to wait for actual data to see if India has truly moved ahead of Japan and by how much.
India is still behind three countries in terms of GDP: Germany, China, and the United States. Germany’s GDP is $4.744 trillion. According to NITI Aayog, India could overtake Germany in a few years. But the United States, with a GDP of $30.507 trillion, and China, with $19.231 trillion, are still far ahead. It is unlikely that India will catch up with them any time soon.
Just because India’s total GDP has surpassed Japan’s doesn’t mean India has become richer than Japan. What matters more is per capita income. India’s population is about 1.46 billion, so its per capita income is $2,868. Japan’s population is around 123 million, and its per capita income is $34,883. This means Japan’s per capita income is more than 12 times that of India’s. So Japan is still much wealthier than India on a per person basis.
China, with a similar population to India, has a per capita income of $19,231. If India wants to compare itself to another country, it should be China, not Japan or the US, because they have much smaller populations. Compared to China, India is still about 6.7 times poorer per person. Germany’s per capita income is $72,599, and the United States’ is $89,105. So clearly, India cannot be compared to these countries in terms of average income.
Even if India overtakes Germany in total GDP in a few years, Germany’s per capita income will still be about 25 times higher than India’s. Germany’s economy is currently shrinking slightly, which gives India a chance to move ahead in rankings. If India’s GDP grows, per capita income also increases. India’s population is growing at around 1.6% a year, while GDP is growing at about 7%. But the key question is: whose income is growing that causes the GDP to rise?
The GDP growth rate is the annual percentage increase in GDP. For example, if GDP was ₹200 last year and is ₹210 this year, the growth rate is 5%. From 2004 to 2014, India’s GDP grew at about 7.5% annually—the highest it has ever been. During that period, there were even years with over 10% growth. For example, during Rajiv Gandhi’s tenure as Prime Minister, GDP growth crossed 10% in one year.
Recently, for the year 2024–25, India’s GDP growth was about 6.5%, the lowest in the past four years. Even if GDP grows at 7% per year, it will double every 10 years. By 2047, India could become a $30 trillion economy. But that doesn’t mean India will overtake the US or China, because their GDP will also keep growing. So even by 2047, it’s unlikely that India will surpass them.
Let’s think about whose development really matters. Suppose my income is ₹1 lakh a year and a wealthy person’s income is ₹1 crore. The country’s total income, or GDP, is ₹1.01 crore, and average income becomes ₹50.5 lakh. Next year, if the rich person’s income doubles but mine stays the same, the GDP becomes ₹2.01 crore, and average income becomes ₹1.005 crore. GDP and per capita income have both gone up, but my income hasn’t changed at all. So we can’t assume that just because GDP and average income increased, the poor have become better off.
Here’s a real example. In the last quarter of 2024–25 (January to March), the construction sector grew by 10.8%. But did the wages of construction workers increase by 10.8%? That is the real question.
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*Gujarat-based economist
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