In Focus by The Hindu India as the world's fourth largest economy: What the numbers tell us
Jun 18, 2025
Partha Chatterjee, Dean of Academics at Shiv Nadar University and economics professor, discusses India's emergence as the world's fourth largest economy. He breaks down recent IMF projections and the World Bank's report on significant reductions in extreme poverty. Chatterjee emphasizes the limitations of GDP as a sole indicator of progress, highlighting deep societal inequalities. He also addresses the vital role of subsidies in poverty alleviation and stresses the need for labor market reforms to sustain growth and improve living conditions in the context of India's ambitious economic goals.
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India's Growth Beats Japan's Stagnation
- India became the world's fourth-largest economy partly because Japan's economy stagnated while India grew about 6% annually.
- Sustained growth since 2000 is commendable but India's goal requires growth closer to 8%.
How IMF Calculates GDP Rankings
- IMF uses country-specific projection models considering local and global economic factors for GDP estimates.
- They base projections on government data and reconcile country models for global consistency.
Limits and Uses of GDP per Capita
- GDP per capita better reflects living standards than GDP alone but doesn't capture inequality or non-market activities.
- GDP is still a useful single indicator for tracking general economic progress over time.