India's Economy: The Mirage of the Fourth-Largest Title

India’s recent claim to the title of the world’s fourth-largest economy, surpassing Japan, sparked celebrations and headlines. The International Monetary Fund (IMF) projects India’s nominal GDP at $4.187 trillion in 2025, edging out Japan’s $4.186 trillion. But beneath the triumphant narrative lies a starkly different reality, one that reveals a nation grappling with deep-seated inequality, persistent poverty, and a growth story that benefits a select few while leaving millions behind. This is a story of numbers for every Indian and global citizen to question what “economic success” truly means.

The Numbers Game: A Misleading Milestone

The claim that India is now the fourth-largest economy is based on projections for 2025, not a done deal. As of now, India’s GDP hovers around $3.9 trillion, while Japan’s remains near $4 trillion. The IMF’s forecast hinges on India’s projected 6.2% growth rate outpacing Japan’s sluggish 0.6%. But this razor-thin margin, $0.586 billion, or 0.014% of GDP, could easily shift due to currency fluctuations or revised growth estimates. In 2016-17, for instance, India’s GDP was reported to grow over 8% despite demonetisation’s chaos, which left markets empty and industries shuttered. Such discrepancies raise questions about the reliability of these projections.

More critically, nominal GDP tells only half the story. India’s population of 1.46 billion dwarfs Japan’s 123 million, making per capita income a better measure of prosperity. India’s per capita GDP is a mere $2,880, while Japan’s is $33,900, a 12-fold difference. Even when China hit a $4 trillion economy, its per capita income was $3,500, and today it exceeds $13,000 with a $19.23 trillion economy. The U.S., the world’s largest economy at $30.51 trillion, boasts a per capita income of $89,000. India’s GDP may be climbing, but for the average citizen, this “milestone” feels hollow.

The Reality of Poverty

India has made strides in reducing extreme poverty, defined by the World Bank as living on less than $2.15 per day. From 2011-12 to 2022-23, extreme poverty dropped from 16.2% to 2.3%, lifting 171 million people above this threshold. Using a stricter $3 per day benchmark, the poverty rate in 2024 is estimated at 5.44%, or roughly 75.24 million people. At the lower-middle-income poverty line of $4.20 per day, 23.9% of Indians, 342.32 million, remain poor. These numbers, while improved, mask a fragile reality.

The rural-urban divide adds another layer. Rural poverty fell from 18.4% to 2.8%, and urban poverty from 10.7% to 1.1% between 2011-12 and 2022-23. Yet, five states, Uttar Pradesh, Maharashtra, Bihar, West Bengal, and Madhya Pradesh, account for 54% of the extremely poor, showing stark regional disparities. The Multidimensional Poverty Index (MPI), which considers education, health, and living standards, estimates 11.3% of Indians (roughly 160 million) remain multidimensionally poor. This progress is notable but uneven, with rural areas and certain states dragging far behind.

Even those above the poverty line live precariously. The World Bank’s $3.65 per day threshold for lower-middle-income countries translates to about Rs 8,500 monthly for a family of four in urban areas, a meager sum for basic needs. Many families survive only because multiple members work, often in low-paying, informal jobs. The 2023-24 median earnings of the top 10% were 13 times higher than the bottom 10%, and the consumption-based Gini index, while improved to 25.5, likely underestimates inequality due to data limitations.

The Billionaire Raj

India’s economic growth has been a boon for the elite, but it has deepened the chasm between the rich and the rest. The top 1% hold 22.6% of national income and 40.1% of wealth, levels unmatched globally, even surpassing South Africa and Brazil. The richest 10% own 80% of the nation’s wealth, while the bottom 50% scrape by with just 3%. The Gini coefficient for income inequality rose from 52 in 2004 to 62 in 2023, signaling a widening gap. India’s 119 billionaires have seen their wealth grow tenfold in a decade, while healthcare costs push 63 million people into poverty annually.

The urban-rural divide is even more shocking. The four states of Maharashtra, Tamil Nadu, Gujarat, and Karnataka are projected to account for nearly 50% of India’s GDP by 2030, while six low-income states, Assam, Chhattisgarh, Nagaland, Madhya Pradesh, Odisha, and Uttar Pradesh, house over a third of the population but fall behind in development. The middle class, estimated at 66 million (4.5% of the population), benefits from stock market gains and urban opportunities, but the 1.2 billion lower-income individuals see little of this prosperity.

Why the Narrative Misleads

The government’s narrative, amplified by outlets like NITI Aayog, paints India’s rise as a triumph of policy and leadership. Yet, this glosses over structural flaws. Economic shocks like demonetization (2016), GST (2017), the NBFC crisis (2018), and the 2020 lockdown disrupted growth estimates, often leading to overoptimistic projections. For instance, the 2016-17 GDP growth was reported at over 8% despite widespread economic distress, highlighting methodological issues.

Moreover, the focus on GDP ignores human development. India ranks 136th in nominal GDP per capita and 119th in PPP terms. The 2019 Global Hunger Index placed India 102nd out of 117 countries, improving to 105th in 2024, still in the “serious” category. Education and healthcare access remain unequal, with 61 million children under five chronically malnourished in 2005-06. The Gross Enrolment Ratio in tertiary education is low, and caste and gender discrimination further limit opportunities.

Projections

The IMF predicts India will become the third-largest economy by 2028, with a GDP of $5.723 trillion, overtaking Germany. By 2030, the economy could reach $7.3 trillion, and by 2035, $10 trillion, according to the Centre for Economics and Business Research. Private wealth is projected to grow 180% to $22.814 trillion by 2028. But TheBrink predicts that without redistribution, these gains will concentrate further. The top 1% could control over 50% of wealth by 2030 if current trends persist, while the bottom 50% may see marginal improvements.

Poverty projections are less rosy. The World Bank estimates global extreme poverty at 7.3% by 2030, with India’s share remaining significant due to its population size. Even with sustained 6% growth, the absolute number of poor could hover around 300 million at the $4.20 per day threshold. Youth unemployment, at 13.3% (29% for tertiary-educated graduates), and wage disparities will continue to fuel discontent.

What This Means for the Common Person

For the average Indian, the “fourth-largest economy” label is a distant abstraction. It doesn’t translate to better wages, affordable healthcare, or quality education. The urban elite may revel in India’s data center boom or stock market highs, but for the 600 million in the middle class or the 1.2 billion lower-income citizens, life remains a grind. The top 1% earning 23% of income while the bottom 50% share just 13% means that economic growth is a spectator sport for most.

This disconnect breeds instability. The U.S., with 38 million in poverty despite a $30.51 trillion economy, shows what happens when growth doesn’t trickle down, political polarization and social unrest follow. India risks similar turmoil if inequality isn’t addressed.

India’s economic ascent is undeniable, but it’s a half-told story. The government must shift from celebrating GDP milestones to addressing the lived realities of its people.

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-Chetan Desai (chedesai@gmail.com)