India beating Japan as world's 4th biggest economy no cause for major celebration, warns ex-WEF MD

For many, the news that India is about to become the world's 4th largest economy is yet to sink in, but experts are alreadycautioning the country against complacency even as it looks set to shortly surpass Japan en route to this major economic milestone. News agency PTI reported on June 8 that Claude Smadja, former Managing Director of the World Economic Forum, has emphasised that while India's economic size is impressive, its GDP per capita lags significantly behind Japan's.

According to the International Monetary Fund (IMF), as of April 2025, India's GDP per capita stands at $2,878.4, which is just 8.5 per cent of Japan's GDP per capita of $33,955.7. This disparity highlights that Japan's income per capita is approximately 11.8 times greater than India's.

"Yes, it (economy size) is a good indicator because it gives a notion of the economic weight of the country on the global balance. No, it is not a good indicator because what counts is the per capita GDP," PTI quoted Smadja as saying.
Accelerating Economic Reforms

Smadja believes that India's improved economic standing should act as a motivation to accelerate reforms. He stressed the importance of ensuring that economic growth benefits all citizens, extending beyond just the growing middle class.

He noted, “India stands at a pivotal crossroads in the global technology race,” and highlighted the country's unique advantage in big data. With widespread internet access and a robust mobile phone network, data generation in India is at an exponential rate, influencing various aspects of daily life.

Protecting strategic data assets

India's potential as a leader in big data comes with challenges. Smadja warned that US tech companies are keen to access India's data, especially as China restricts its data environment and Europe tightens regulations. “In India, we need to make sure that it protects this huge strategic asset,” he remarked.

This asset could be instrumental for technological advancements, including artificial intelligence and deep tech, and should be utilised to benefit the entire population, particularly rural communities, Smadja observed.

Innovation and skill development

Smadja praised India's vibrant startup ecosystem and called for more robust policies to support innovation. He pointed out that corporate India has tended to purchase technology rather than develop it.

He urged for a concerted effort from Indian corporations to enhance research and development (R&D) capabilities.

While the young demographic of India is a significant advantage; however, Smadja highlighted the pressing need for skill development and reskilling across the workforce. To achieve the ambitious target of a $7 trillion economy by 2030, India will need to expand its industrial base, as its manufacturing share in GDP is currently much lower than that of China, he pointed out.

Boosting rural productivity

To realise this economic growth, Smadja said that enhancing productivity in rural areas is vital. Increased rural productivity will not only elevate overall economic output but also improve purchasing power among rural populations, leading to broader consumption and more inclusive growth.

While India's journey to becoming the fourth-largest economy is noteworthy, it is essential to address underlying challenges and ensure that growth translates into a higher quality of life for all citizens, he noted.