India as the World’s 3rd Economy: Myth or Milestone?
1. The Politics of Economic Milestones
Amid a lot of talk on this issue—India potentially becoming the third-largest economy globally—the reality is nuanced. Too often, this debate includes more politics than economics, transforming legitimate economic milestones into political rhetoric.
India’s ascent to the 3rd-largest economy is often narrated with political fanfare. Comments like “India will soon overtake the UK and Germany” are more about electoral optics than economic substance. The discourse increasingly becomes more politics than economics, overshadowing serious policy debates on equitable growth.
2. Aggregate GDP vs. Individual Welfare
As of 2024, India held the position of the 6th-largest economy, with a nominal Gross Domestic Product (GDP) of approximately USD 3.7 trillion. The nation is projected to surpass the United Kingdom and Germany, potentially claiming the 3rd spot within the next few years, according to the International Monetary Fund (IMF) and World Bank (WB) projections.
While aggregate GDP growth is commendable, it remains disconnected from people’s daily realities:
- Per Capita Income: At USD 2,600 (2024), India’s PCI is far lower than China (USD 12,800) or advanced economies. This is one of the lowest among major economies, reaffirming the limitation of using aggregate GDP as a measure of individual prosperity.
- Poverty and Hunger: Millions still suffer chronic hunger; child malnutrition remains alarmingly high.
- Population Dividend vs Population Burden: The population provides both a labor pool and pressure on public services.
3. Fiscal Challenges and Debt Sustainability
India’s GDP-Debt Ratio (GDR) currently stands at around 83%, lower than many advanced economies. Still, it raises concerns—especially given the persistent fiscal deficits. A GDP-debt ratio of 83% raises fiscal sustainability concerns. Keeping this ratio in check will rely heavily on:
- Expanding the tax base (GST compliance, digital taxation).
- Prudent public spending and targeted subsidies.
- Enhancing productivity in public sectors like agriculture and education.
The Reserve Bank of India (RBI) emphasizes the importance of stabilizing GDP-debt ratio to maintain economic resilience.
4. A Highly Populated Nation — Poverty and Hunger
Indeed, India is the most populated country, with over 1.43 billion people. This demographic dividend contributes heavily to its aggregate GDP, but also poses challenges—particularly in delivering equitable growth.
Persistent poverty and hunger exacerbate the inequality in economic gains. According to the World Food Programme (WFP), 15% of the Indian population still experiences food insecurity. Nearly 23.4% of Indians live below the poverty line, underlining that a high GDP doesn’t always translate into improved living standards for all.
5. Inflation vs GDP Growth
India’s inflation rate hovers around 5.5%, which is moderate but still burdensome for low-income households. Inflation-adjusted GDP (Real GDP) continues to grow near 6–7% annually, yet inflation-sensitive sectors—like food and fuel—affect daily life significantly.
Moderate inflation at 5.5% may seem manageable, but it disproportionately hurts the poor. In rural India, where food accounts for 60–70% of the household budget, price volatility translates to hardship—not just numbers.
6. India Remains an Emerging Economy
Despite these shortcomings, there is no doubt that India is a leading emerging economy. Its technological prowess, startup ecosystem, infrastructure investments, and demographic potential reinforce its long-term economic promise.
However, GDP size alone is not a solution to every economic problem. Large aggregate numbers can mask underlying structural challenges, such as unemployment, regional disparities, and low productivity in agriculture and informal sectors.
7. Figure Based on Population
Much of India’s ranking success stems from its sheer population, not necessarily from efficient productivity per person. Arguably, its GDP ranking is more a figure based on population than a testament to economic efficiency.
A more meaningful measure of development is the rise in PCI. When PCI grows, it reflects real improvements in individual standards of living—not just economy-wide output.
8. Gaps Between Growth and Development
Finally, growth and development are separate issues and should be treated accordingly. While GDP growth indicates economic expansion, development should measure quality of life improvements—education, health, nutrition, and economic inclusivity.
India’s growth has been concentrated in IT, services, and urban centers. Rural development, inclusive job creation, basic healthcare, and education equity still lag behind. Thus, growth does not automatically mean development, and policy must address both spheres.
9. The Role of Policymaking – Concluding remarks
The Indian Government (IG) must balance:
- Macro-economic goals (maintain GDP growth, investment).
- Micro-economic priorities (poverty alleviation, rural healthcare, skills development).
Policymaking should reflect long-term development—not just short-term political wins.
Abbreviations
| Abbreviation | Full Form |
| GDP | Gross Domestic Product |
| GDR | GDP-Debt Ratio |
| IG | Indian Government |
| IMF | International Monetary Fund |
| IT | Information Technology |
| PCI | Per Capita Income |
| RBI | Reserve Bank of India |
| WB | World Bank |
| WFP | World Food Programme |
