(India has "surpassed" Japan to become the world’s fourth largest economy, with GDP valued at $4.18 trillion, said the Central government in a statement earlier this week. This opinion article has been republished from The Quint's archives in light of the statement. It was originally published on 27 May 2025.)
In May 2025, the NITI Aayog chief seemed to jump the gun when he said India had moved past Japan in the International Monetary Fund (IMF)'s GDP rankings. As many commentators reported, a correct reading of the IMF's estimates shows that it will take another year.
More importantly, the IMF compares the GDP at 'current' prices, which doesn’t tell us the 'real' size of an economy. An economy with high inflation can appear to be bigger than another where inflation is low, even if its real output is lower.
If this is Greek to you, here’s an imaginary story that might help you understand it.
Once there were two friendly kingdoms. One was called Hispania, and the other was known as Asgard. The people of Hispania used a currency called doubloon. Asgard’s currency was called lunar.
In the year when our story begins, Hispania’s total income was 100 billion doubloons. Since, 10 doubloons exchanged for one US dollar, the IMF recorded Hispania’s GDP as $10 billion.