India Overtakes Japan: Raging Debate Singes PCI Disparity

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India Overtakes Japan as World’s Fourth-Largest Economy, Sparking Heated Debate Over Per Capita Income Gains

By S JHA

MUMBAI, May 26, 2025 – India overtaking Japan to become the world’s fourth-largest economy with a nominal GDP of USD 4.187 trillion has ignited a fierce debate over economic progress, particularly around per capita income growth.

The milestone, confirmed by NITI Aayog CEO B.V.R. Subrahmanyam and backed by International Monetary Fund (IMF) data, has drawn both celebration and scrutiny, with former Finance Minister P. Chidambaram and Japanese media weighing in on the broader implications.

Subrahmanyam announced at a press briefing following the 10th NITI Aayog Governing Council Meeting, “We are the fourth-largest economy as I speak. We are a USD 4 trillion economy, and this is not my data – it’s IMF data. India today is larger than Japan.”

The IMF’s World Economic Outlook report projects India’s GDP at USD 4.19 trillion in 2025, edging out Japan’s USD 4.186 trillion. Subrahmanyam added that India could overtake Germany to become the third-largest economy in 2.5 to 3 years, driven by robust growth of 6.2–6.5% in 2025, fuelled by “rising consumption and structural reforms”.

However, the spotlight has shifted to per capita income, a key measure of individual prosperity. P. Chidambaram, former Finance Minister under the UPA government, in a post on X acknowledged India’s economic leap but emphasized a comparative analysis of per capita income growth. He posted, “CEO of NITI Aayog told the media that India’s per capita income had doubled from USD 1438 in 2013-14 to USD 2880 (in 2024 in 11 years). Broadly correct, and we are happy. However, he should have given the full picture which, according to the IMF, is: 2003: USD 543, 2013: USD 1438, 2023: USD 2711, 2024: USD 2878.”

He stated that “under the UPA government, the per capita income more than doubled in 10 years: actually 2.64 times. Under the NDA government, the per capita income fell short of doubling in 10 years: (actually 1.89 times). The per capita income doubled in 11 years. I am happy with the record of both governments but a shade happier with the UPA record.”

Japanese media has been candid about the shift. The Japan Times reported, “Economic stagnation and a weak yen could take Japan’s economy to fifth place globally as early as next year.”

Quoting Marcel Thieliant, head of Asia-Pacific for Capital Economics, the outlet noted, “Based on our existing forecasts, we had expected India to overtake Japan in 2026. The forecasts are currently being reviewed in light of recent events.”

The IMF’s 2025 projection caught some analysts off guard, with S&P Global Ratings predicting the swap by 2030. The Japan Times highlighted Japan’s struggles, stating, “Japan has been consistently grappling with recurring recessions and decades-long deflation. Japan’s woes are exacerbated by its ageing population and low productivity across sectors. A weakened yen also significantly impacts the far-eastern country’s standing in these rankings.”

Amid raging debate, the social media platforms have become minefield of commentators making per capita income comparison, which, they claimed, is 10 times more for Japan. They highlighted the stark gap in per capita income –

Japan’s USD 33,000 against India’s USD 2,880 –underscoring that India’s economic size benefits from its massive population, while Japan’s higher per capita income reflects greater individual wealth.

While India’s GDP size is expanding, though at a slower pace, Japan is facing a contraction to deepen worry within the country. From GDP of USD 6 trillion in 2010, Japan’s economy shrunk to USD 4.2 trillion. An aging population, stagnant productivity, and deflation pose significant challenges to Japan per experts.