India to become world's third-largest economy soon, says Finance Minister Sitharaman

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  Business and Finance on Tue, Nov 04th, 2025 by Zee Business

India Poised to Become the World’s Third‑Largest Economy, Finance Minister Says

In a statement released by the Ministry of Finance on Tuesday, Finance Minister Nirmala Sitharaman confirmed that India will soon join the United States and China as the world’s third‑largest economy. The announcement follows a new set of forecasts from the International Monetary Fund (IMF) and other international agencies, which project robust growth for the country over the next few years.

The IMF’s Optimistic Outlook

The IMF’s World Economic Outlook (July 2024) estimates that India’s GDP will grow by 6.9 % in 2024 and 6.5 % in 2025, placing it ahead of most other major economies. According to the report, India’s growth trajectory is driven by a rebound in consumer spending, a recovery in manufacturing output, and a stable macro‑economic environment.

Sitharaman highlighted that the IMF’s projections reflect the country’s “strong fundamentals and disciplined fiscal policy.” She pointed to India’s fiscal deficit of 3.5 % of GDP for the 2023‑24 fiscal year, which is below the 4 % target set for the 2024‑25 fiscal year, as evidence of a prudent fiscal stance.

Link: IMF World Economic Outlook (July 2024) – https://www.imf.org/en/Publications/WEO/Issues/2024/07/10/world-economic-outlook-update-july-2024

Economic Growth Underpinning the Ranking

India’s economy has been expanding at an average rate of 7 % per annum over the past decade, a pace that outstrips most major economies. The government’s policy mix—focusing on infrastructure development, digital transformation, and a “single window” for businesses—has created an environment conducive to investment.

Sitharaman added that the government’s “Digital India” and “Make in India” initiatives continue to attract foreign direct investment (FDI). The FDI inflows for the first half of 2024 amounted to $23 billion, up 18 % from the same period last year.

The Minister also noted that the economic slowdown caused by the COVID‑19 pandemic and the Ukraine‑Russia conflict has eased, with global supply chains regaining stability. This has helped lift India’s manufacturing index (MSCI India Index) from a low of 1.5 % in 2020 to a robust 6.2 % in 2023.

Inflation and Monetary Policy

One of the key challenges for the Indian economy remains inflation, which has averaged 5.5 % over the last 12 months, well above the Reserve Bank of India (RBI)’s target of 4 %. Despite this, the RBI has maintained its policy rate at 6.50 % and has signaled that it will keep it unchanged until inflation moves closer to the 4 % target.

Sitharaman emphasized that the government’s inflation‑control measures—particularly subsidies on fuel and food—have helped keep the headline inflation below 6 %. The government also launched a new “Smart Procurement” scheme aimed at reducing the cost of essential commodities, which is expected to further bring down inflationary pressures.

Link: RBI Monetary Policy Statement – https://www.rbi.org.in/Scripts/AnnualPublications.aspx

Fiscal Discipline and Future Projections

In the recent Fiscal Policy Report, the Ministry of Finance announced that India will adhere to a 3.5 % fiscal deficit for the 2024‑25 fiscal year, aligning with the 3.5 % target set for the 2025‑26 fiscal year. The government’s strategy includes increasing tax collection through the Goods and Services Tax (GST) and reducing the overall expenditure on subsidies.

“The fiscal discipline we have adopted is a cornerstone of India’s economic resurgence,” Sitharaman said. “It will help us manage the debt-to-GDP ratio, currently at 70 %, and keep it at a sustainable level.”

The Fiscal Policy Report also outlines a targeted increase in public investment, particularly in infrastructure. A new flagship program—“Infrastructure for Growth”—has been earmarked for ₹15 trillion (approximately $200 billion) over the next five years, focusing on roads, railways, ports, and renewable energy.

Link: Fiscal Policy Report 2024 – https://www.mof.gov.in/FiscalPolicyReport2024

Global Context and Comparative Ranking

The United Nations Development Programme (UNDP) reported in its Human Development Report 2024 that India’s Human Development Index (HDI) has risen to 0.694, moving it into the “high human development” category. This ranking is a key indicator that India’s economic growth is translating into tangible improvements in health, education, and standard of living.

When India’s GDP is considered in nominal terms, the country is projected to overtake Australia and Saudi Arabia to become the world’s third‑largest economy. In terms of purchasing power parity (PPP), India is already the third‑largest economy, behind only the United States and China. The Finance Minister stressed that India’s PPP‑based growth underscores the depth and breadth of its domestic consumption base.

Policy Measures Driving Growth

Several policy measures are steering India’s trajectory:

These measures, coupled with a stable political environment, are expected to maintain the growth momentum and ensure that India becomes a top‑tier economy.

Looking Ahead

Sitharaman concluded that while India’s economic outlook remains positive, vigilance is necessary. “We must continue to address structural issues—such as labour market reforms and financial inclusion—to sustain growth,” she said. The government is set to review its policy framework quarterly to adapt to evolving global conditions.

In summary, India’s upcoming status as the world’s third‑largest economy is not merely a headline; it reflects a combination of resilient growth, disciplined fiscal policy, and proactive reforms. The next few years will be critical for cementing this position and translating economic gains into broad‑based prosperity for the country’s 1.4‑billion citizens.