The size of a country's economy is measured in terms of the Gross Domestic Product (GDP). The GDP is the sum of the monetary value of everything that is produced in the country, or in other words, everything that is consumed in, invested in and exported out of the country.
India's economy was the fifth largest in the world as of 2024.[1]
India's GDP
The GDP is measured in local currency terms, and is converted to US dollars using the prevailing exchange rate in that period to make international comparisons. India's GDP in 2023 was ₹300 trillion (Rs 300 lakh crore).[2] In dollar terms, it was $3.7 trillion.
India is projected to be the fourth largest economy in the world by 2027[3] by the International Monetary Fund, and the third largest by 2031.[4]
GDP growth
Real and nominal growth
GDP growth is the change in GDP over time. It is used by governments, corporations, central banks and multilateral institutions to project national revenues, forecast demand for goods and services, assess future earnings from investments, among other calculations.
The GDP for a year is calculated, in crude terms, by multiplying the volume of goods and services produced in the country in that year, by the prices of those goods and services prevailing in that year. This is also termed as the nominal GDP for that year. Nominal GDP for any successive year is formulated at prices prevailing in that very year.
The change in nominal GDP from one year to another is, as a result, made up of both the change in the volume of goods and services produced, and the change in prices in that period. Year-on-year growth in nominal GDP therefore includes price growth.
However, what translates into material improvements in the economy is the volume growth only, without inflation. Economists do this by deciding a base year for a GDP series, and then, using the prices of goods and services prevalent in the base year only, to formulate the GDP for any successive year. This gives us the real GDP.
In this piece, we use India's official data on national accounts with 2011-12 as the base year.[5] According to the 2011-12 series, India's nominal GDP in the financial year 2011-12 was ₹87.4 trillion (~$ 1.8 trillion at the prevailing exchange rate). It increased to ₹301 trillion in 2023-24, or $3.63 trillion, using prices prevalent in 2023-24. This represents an annualised growth rate of 10.9%.[6]
India's real GDP in 2023-24, on the other hand, was ₹176 trillion ($2.13 trillion). This was measured using the volume of goods and services produced in 2023-24, but at prices prevalent in 2011-12, the base year. This represents an annualised growth of 6% in real GDP from 2011-12 to 2023-24.
India's GDP growth in global perspective
India's economy, or its real GDP, grew slower than the global average for many decades until the 1980s, after which, it took off. Since the 2000s, India has become one of the world's fastest growing economies, with its post-pandemic growth rates in particular being higher than those of many emerging economies including China.
India's GDP now generally grows faster than many neighbouring emerging peers such as Bangladesh, and many richer economies such as Brazil and Mexico. High-income advanced economies generally exhibit lower GDP growth due to structural factors.
Per capita income
While the GDP reflects the total size of a country's economy and is important to understand how big a market that country represents, it does not on its own give a sense of individual well-being. A country with a small population might have a smaller GDP than a larger one purely due to more people contributing to the economy in the latter, but an average individual in the smaller country may be living a better quality of life. As a result, looking at the country's GDP relative to its population produces a better picture of what well-being in the country looks like.
The per capita income is the GDP divided by population.[7] India's per capita income was ₹200,000 in 2024.[8] In dollar terms, India's per capita income in 2024 was $2,600, according to the World Bank. This means that while India was sixth in terms of national GDP, it was 136th out of 183 countries in terms of GDP per capita.
Compared with countries with similar national GDPs, India's per capita GDP is several times lower. For instance, the nominal GDP of Japan was $4.2 trillion in 2024, comparable to India's $3.8 trillion. But Japan's per capita GDP in the same year was $33,000 as compared to India's $2,600 in nominal terms.
Purchasing power parity
Comparisons between countries using per capita incomes can sometimes become tricky, because the prices that people have to pay for goods and services are markedly different - one US dollar can buy a lot more in rural India than it can in New York City.
As a result, economists and organisations often make these comparisons using incomes that have been adjusted for the differences in purchasing power in those countries. They do this using currency conversion factors known as purchasing power parities, or PPP.
The International Comparison Programme (ICP) at the World Bank calculates PPPs by defining a basket of goods and services in a country, and determining the amount that a household in that country needs to spend to buy it. Using the US dollar as the base currency, it then creates conversion factors for currencies of all countries.
For example, let us assume that a basket of daily needs costs $100 in the United States, and Rs 2000 in India. If we use the US dollar as the benchmark ($1 PPP = US $1), it would mean that what can be bought in $1 in the US could be bought with Rs 20 in India. The PPP conversion factor for India, then, is 20. This is different from the market-based currency exchange rate.[9]
The UK's per capita income in 2024 was 20 times that of India's in US dollar terms. But a part of this difference is due to the difference in price levels of goods and service in the UK vis-a-vis India. In purchasing power parity terms, the UK's per capita income was less than six times that of India's.
Is per capita income the best way to understand people's well-being?
The per capita income is a crude measure of individual income - it does not actually estimate an average individual's income, but is simply the national income divided by the population. We do not have data on all individual incomes - only 8% of working-age Indians file income tax returns.[10]
Another way to understand individual incomes would have been through household surveys. However India's official household surveys measure only spending[11] and not incomes, because many individuals with multiple small jobs, or with seasonal agricultural incomes could find it hard to accurately answer how much their annual income is.
In broad terms, however, a country's per capita income correlates well with other development outcomes like health and education - the richer a country gets on the whole, the more likely it is that its people's well-being improves. People in richer countries live longer than those in poorer countries, for instance.
Measuring GDP
A country's GDP is the monetary value of all the goods and services that are being produced during a particular period.[12] It is the most fundamental economic indicator and allows us to understand the extent of economic activity in a country.
There are two key ways of understanding and measuring the GDP. One is the expenditure approach, where everything that is spent by the government and individuals in a year is added up to estimate GDP. In this approach, the GDP is calculated by adding private spending on consumption (food, health, education, etc.), government spending, private and public investment (machinery, factories), and net exports.[13]
The second is the production approach, which looks at the value of all goods and services produced in the country, and results in a related measure called the Gross Value Added in the economy, or the GVA. To measure the GVA, a country must measure the volume of output in all sectors and sub-sectors and multiply it by prices to get the value added. The value of inputs and intermediate goods[14] is subtracted.
A third way of measuring the GDP is the income approach which is broadly the sum of all incomes generated in the country. Countries like India and the United States use it to measure part of the value added, especially the value added by public sector companies like the railways.
India's national statistical office measures and presents national economic data in the first two ways: at the expenditure side (private and government consumption, and investments), and at the production side (agriculture, manufacturing, and services). For example, India's gross domestic product using the expenditure approach was ₹294 trillion for the financial year 2023-24. The gross value added using the production approach was ₹267 trillion.[15] The difference of ₹27 trillion between the GDP and the GVA is equal to indirect taxes collected by all tiers of the government minus subsidies provided by all tiers of the government.
However, the calculation of the GDP presents serious challenges, particularly in a developing country like India, where a large share of enterprises in the country do not maintain books of accounts, and are not registered with any authority - family-run grocery stores, or small farmers who sell their produce to local buyers without any record, for example.[16] The value added by such enterprises has to be imputed using some assumptions and statistical calculations. In 2026, the NSO made significant changes to its methodology of estimating the GDP.
All GDP estimates are benchmarked to the year when the particular accounting series begins, called the base year. To create a new national accounts series, a new base year is decided every few years. In the current national accounts series, the base year is 2011-12. In this series, nominal GDP for 2019-20 would be calculated by multiplying the volume of goods and services produced by prices prevailing in 2019-20. Real GDP for 2019-20 would be calculated using the volume of 2019-20 and prices of 2011-12.
[1] International Monetary Fund, July 2025.
[2] Corresponds to the financial year April 2023 to March 2024
[3] While most countries of the world consider the calendar year itself as the financial year, India's financial year runs from April of one year to the March of the next. For instance, data for 2023 in the IMF or World Bank database refers to January - December 2023 for the US, but April 2023 - March 2024 for India.
[4] International Monetary Fund projections.
[5] In February 2026, India's National Statistics Office released a new series of national accounts with 2022-23 as the base year. In this piece, we use the previous series of national accounts that use 2011-12 as the base year, since it offers a long term time series.
[6] Compounded annual growth rate, or CAGR.
[7] There are several alternative indicators that are derived from the GDP. India's national statistics office uses per capita net national income (NNI) as the measure of per capita income. The gross national income (GNI) includes the value of the production by all citizens of a country regardless of whether they produce it in the country or not. Net national income is when we adjust for depreciation of fixed assets from gross national income. This data is at nominal prices.
[8] Corresponds to the financial year April 2023 to March 2024.
[9] The PPPs are produced by the International Comparison Program at the World Bank.
[10] 81 million individuals filed income tax returns in India in the financial year 2024-25, according to the Income Tax Department. India's working age population is close to one billion.
[11] The average monthly per person expenditure on all items as of 2023-24 was ₹4,122 in rural areas and ₹6,996 in urban areas. That is significantly lower than the per capita income derived by dividing the national income by the population. (Source: Household Consumption Expenditure Survey 2022-23 Factsheet, National Sample Survey Office).
[12] GDP does not include the following, as the International Monetary Fund notes:
- Domestic responsibilities such as cooking and childcare
- Value of ecological resources and their degradation
- Black market activities
[13] Imports do not form a part of the GDP since they do not represent domestic production.
[14] For example, while producing a packet of biscuits, flour and other food products are used, plastic is used for packaging, while the distributors use transport services for last mile reach. The calculation of gross output considers the value of all the intermediate goods and the final product. But the value of the biscuit packet includes the costs of flour, plastic packaging and transport, and this counts the value of intermediate goods twice. To remove the double counting, the value added by intermediate goods is subtracted from the value of output to get the gross value added in the economy.
[15] Second advance estimates of national accounts for the financial year 2023-24, National Statistics Office.
[16] There are additional challenges. This national accounts series (2011-12) was the first series to use administrative data from the Ministry of Corporate Affairs to determine the value added in the private non-financial corporate sector. However the NSO later found that many of the companies in this administrative database were non-functional.
