Bharat is also perceived as super power in military strength, a space power and green energy. The political stability of a decade with the leadership of undeterred political will in all aspects of national growth, is a major factor in Bharat’s march towards global leadership. — Vinod Johri

In the vast landscape of global economies, Bharat stands out with its meteoric rise and unwavering determination to reach new heights. With its rich cultural heritage and a population of over 1.4 billion people, Bharat has emerged as an economic powerhouse, consistently showcasing its prowess on the global stage. The year 2023 has proven to be a turning point as Bharat’s GDP surges, solidifying its position as a frontrunner in the global economic race.

Bharat is ranked 5th in world’s GDP rankings in 2024. Our economy boasts of diversity and swift growth, fuelled by key sectors such as information technology, services, agriculture, and manufacturing. The nation capitalises on its broad domestic market, a youthful and technologically adept labour force, and an expanding middle class. It is further expected to be the world’s third largest economy in the next three years. Bharat’s progress towards third largest economy has already been discussed in detail in the series of the three articles in past three months of Swadeshi Patrika.  

Bharat is on track to become world’s fourth largest economy in 2025, overtaking Japan, accordingly to the latest World Economic Outlook released by the International Monetary Fund (IMF). The report estimates Bharat’s nominal GDP will reach US $ 4187.02 Billion next year, marginally ahead of Japan’s US$ 4186.43 Billion. Bharat is marching towards third largest economy on its own strength and has never followed a policy of confrontation or hegemonic competition detrimental to the economic interests of the other countries. Obviously the fourth ladder comes before the fifth ladder and this progress has to be meticulously analysed and keenly watched for further progress. 

The IMF forecasts that Bharat, will continue to be the fastest-growing major economy, maintaining a growth rate above 6 per cent over the next two years. In contrast, Japan is expected to see muted growth of just 0.6 per cent in both 2025 and 2026, as the global trade slowdown weighs on its export-driven economy.

Two seemingly paradoxical headlines about the Japanese economy are significant. First, in 2023 Japan’s GDP was surpassed by that of Germany. Japan thus dropped to the world’s fourth-largest economy, 13 years after its long hold on the number two position was overtaken by China in 2010. The Japanese economy faces several significant challenges, including a declining and aging population, high government debt, and difficulties in transitioning to a decarbonized economy. These issues contribute to low potential growth, increased social security burdens, and a growing risk of fiscal crisis. Some of these factors may be briefly discussed below -   

1. Demographic Shifts:

Declining and Aging Population: Japan’s population is shrinking and aging rapidly, leading to a shrinking workforce and increased social security costs. This poses a risk of lower potential growth rates and generational inequities, as older generations receive social benefits while younger generations may face increased burdens. 

Labor Shortages: The aging population and low birthrate contribute to labour shortages, impacting various industries and hindering economic growth. 

2. High Government Debt:

Unprecedented Debt Levels: Japan’s government debt is among the highest in the developed world, reaching a debt-to-GDP ratio of 263% in 2023.  

Fiscal Crisis Risks: This high debt level increases the risk of a fiscal crisis or hyperinflation, potentially impacting the stability of the economy.

Burden on Younger Generations: The burden of servicing the debt falls disproportionately on younger generations. 

3. Challenges in Decarbonization:

Lagging in Renewable Energy: Japan faces difficulties in transitioning to renewable energy sources and electric vehicles, potentially hindering its ability to meet its climate goals.

Reliance on Fossil Fuels: Japan remains heavily reliant on fossil fuels, making it vulnerable to global energy price fluctuations and hindering its decarbonization efforts. 

4. Diversifying Investments Away from China

For years, China was a focus of manufacturing investment for Japan. China’s cheap labour force provided a solution to Japan’s labour shortage, helping its manufacturers stay competitive in the global economy. Meanwhile, China became a significant market for Japanese products.

5. Other Challenges

Inflation and Wage Growth: Inflation in Japan is rising, particularly for non-discretionary items like food and energy, making it difficult for households to increase spending. While wage increases have been seen, they have not kept pace with the rising cost of living.  

Japan has struggled to implement structural reforms to address underlying economic problems, such as a deflationary gap and low productivity in certain sectors. 

Political Instability: Rising political instability and the long-ruling Liberal Democratic Party’s loss of majority could further hinder economic progress. 

Geopolitical Tensions: Tensions with China and Russia over disputed islands add another layer of complexity to Japan’s economic landscape. 

Bharat’s strong economic momentum is likely to propel it further up the global rankings. By 2028, the country’s GDP is projected to rise to 5,584.48 billion dollars, placing it ahead of Germany and making it the third-largest economy globally.

Germany, currently the fourth-largest, is expected to be among the worst affected European economies due to ongoing trade tensions. The IMF projects zero growth for Germany in 2025, followed by a modest recovery of 0.9 per cent in 2026. Its GDP is estimated to reach 5,251.93 billion dollars by 2028. Germany’s economy faces several challenges, including a shrinking economy, sluggish productivity growth, an aging population, and high energy costs. The country’s reliance on exports and a heavy industrial sector makes it vulnerable to global economic shifts and competition. 

Some of the factors of negatively affecting German economy may be briefly discussed as under - 

1. Shrinking Economy:

Germany’s economy contracted in 2023, and it’s projected to be the slowest-growing G7 economy in 2024, according to the International Monetary Fund (IMF). 

2. Sluggish Productivity Growth:

Productivity growth has been slow, contributing to overall economic weakness.  

3. Aging Population:

Germany’s population is aging, with a low fertility rate and a declining working-age population.  

4. High Energy Costs:

Germany’s energy-intensive industries have been particularly affected by rising energy prices.   

5. Dependence on Exports:

Germany’s economy is heavily reliant on exports, making it vulnerable to global economic slowdowns and competition.  

6. Trade Imbalances:

While Germany has trade surpluses, the reliance on exports means domestic demand is insufficient.  

7. Labor Shortages:

Germany faces labour shortages, further hindering productivity and growth.   

8. Competition from China:

The rise of Chinese automakers in the global EV market is a threat to Germany’s automotive industry.   

9. Underinvestment:

Budgeted investment money is often underspent due to staff shortages in municipalities, according to the International Monetary Fund (IMF). 

A fractious coalition government can hinder effective policy responses to economic challenges, according to The Economist. 

The United States will retain its position as the world’s largest economy, with a projected GDP of 30,507.22 billion dollars in 2025. China, the second-largest, is expected to record a GDP of 19,231.71 billion dollars.

The IMF notes that the US economy, having initiated a wave of global tariffs, is showing signs of a slowdown. Growth is forecast to dip to 1.8 per cent this year and 1.7 per cent in 2026.

The Euro Area is also likely to witness sluggish growth, with an expected expansion of just 0.8 per cent in 2025, picking up slightly to 1.2 per cent in 2026. France is projected to grow at 0.6 per cent and 1 per cent in the next two years, respectively.

Spain is expected to outperform its peers with a 2.5 per cent growth rate in 2025, although this is likely to ease to 1.8 per cent in 2026. The United Kingdom is forecast to grow at 1.1 per cent and 1.4 per cent during the same period.

Bharat is also perceived as super power in military strength, a space power and green energy. The political stability of a decade with the leadership of undeterred political will in all aspects of national growth, is a major factor in Bharat’s march towards global leadership.  

Source – DD News, Newspaper reports

Vinod Johri, Former Additional Commissioner of Income Tax, Delhi