India has officially emerged as the world’s 4th largest economy by nominal GDP, surpassing economic heavyweights like the UK and France. While this milestone has generated significant political and public commentary, some of it celebratory and some dismissive, it’s essential to parse this through an economist’s lens—rooted in facts, proportionality, and strategic foresight. I am clearly masquandering here as an economist, while sharing this view, while I am not a trained economist at all, and yet, I would like to stay away from any political discourse on this, and focus objectively.
Yes, GDP per capita matters. At approximately $2,850 in 2024 (nominal terms), India ranks around 130th globally, far behind China ($11,000). Critics often use this statistic to belittle India’s overall GDP achievement. But this is a simplistic and incomplete narrative. GDP per capita reflects average individual income, and while it captures welfare more directly, it does not negate the macroeconomic significance of India’s total output crossing $3.7 trillion.
The 4th largest economy is not merely symbolic, over even a Just a Vanity Metric —it has tangible, strategic consequences:
• Geopolitical Leverage: A higher GDP translates to increased global bargaining power. India’s influence in forums like the G20, BRICS, and the WTO is now backed by economic heft. This is not mere optics—FDI decisions, trade negotiations, and defense alliances are influenced by such metrics. The result of this is already visible in oil and defence contracts being signed, something that would be much harder with a lower GDP
• Fiscal Muscle: A $4 trillion economy generates significantly more fiscal revenues, enabling India to invest in areas long underfunded—defense, infrastructure, social welfare, and climate resilience. Defense allocation in 2024 was ₹6.2 lakh crore (~$75 billion), up 13% year-on-year, and growing—enabled by GDP expansion. Higher investment in Defence can also lead to higher Defence exports, buoyed by the recent showcasing of our indigenously produced defence equipment like Akash, in the Pak squirmish recently.
• Capital Formation: Higher GDP encourages private investment, both domestic and international. India’s gross fixed capital formation crossed 30% of GDP in 2023–24, and infrastructure buildout—railways, expressways, ports—is at a scale not seen before.
In 1962, India’s GDP per capita was higher than China’s. Today, China’s GDP is over $17 trillion—nearly 5X India’s, and its per capita income is 4X greater. The divergence wasn’t inevitable; India’s lagging is the consequence of inconsistent policy, missed reforms, and populist economics (blind socialism and protect domestic market). That is precisely why this moment must not be wasted.
Skeptics mock the $2,850 per capita figure. But the journey from $2,000 to $10,000 per capita income is transformational—not incremental, in my view. Let me explain how.
At $2,000–3,000, household expenditure is focused on bare essentials—food, rent, basic healthcare. As incomes rise, discretionary spending (education, electronics, entertainment, personal mobility) takes off, creating a virtuous consumption-investment cycle.
• Two-wheeler sales rise, then plateau, and are replaced by automobile ownership.
• More Indians begin to take domestic and international holidays, eat out more frequently, and spend on grooming, appliances, and gadgets.
• Demand for private education, insurance, and real estate surges—spawning industries and jobs.
In macro terms, this shift contributes to consumption-led GDP growth, diversification of the economy, and more stable employment patterns.
None of this is to deny India’s stark challenges:
• Education & Health: Public expenditure on education is still around 2.9% of GDP, and on health, 1.9%—both grossly inadequate.
• Judicial Delays & Corruption: Contract enforcement takes an average of 1,445 days, among the slowest globally.
• Water stress, urban waste management, and regional inequality remain critical bottlenecks.
But the key point is this: India now has the economic scale and a conducive policy climate to address these head-on—if we choose to double down.
To belittle India's GDP rank by highlighting per capita limitations is intellectually lazy and strategically myopic, in my view. It is equivalent to mocking a young athlete’s progress because they haven't yet won an Olympic medal, despite breaking into international competitions.
India's economic trajectory is not a guaranteed success story—but it is the best opportunity in decades to structurally transform into a middle-income economy by 2035 and a high-income economy by mid-century. The imperative now is not to politicize or polarize this moment. It is to invest in human capital, reform governance, and accelerate inclusive growth.
India has arrived at the starting line of economic leadership. The race is long, but the direction appears finally right.
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