Ease of Doing Business Can Propel India’s Trajectory to Becoming the Third Largest Economy
India has long maintained a track record of being among the fastest-growing economies worldwide. The latest milestone in this journey was the country surpassing Japan to become the fourth-largest economy in the world in May 2025. This comes close on the heels of India beating the UK to become the fifth-largest economy in 2020. The path to growing from the 10th largest economy to the 4th largest has taken just 11 years.
Sustained Economic Growth
We’re now a $4 trillion economy. The IMF’s World Economic Outlook report for April projects India’s nominal GDP for FY2026 at $4,187.017 billion, compared to Japan’s forecasted $4,186.431 billion. The report predicts that India will remain the fastest-growing economy for the next two years, growing by 6.2% in 2025 and 6.3% in 2026.
While we rejoice this, there’s widespread optimism regarding India overtaking Germany in the near future. EY has predicted that India could become the third-largest economy by FY2028, overtaking Germany with an estimated GDP of $5.2 trillion. Currently, Germany is the third largest economy in the world with a GDP of around $4.744 trillion.
What could drive India to achieve such rapid economic growth? Micro, Small, and Medium Enterprises (MSMEs) have emerged as the cornerstone of India’s growth story. This segment has seen tremendous growth, with MSME exports rising from ₹3.95 lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25. Small entrepreneurs are the backbone of the Indian economy, playing a crucial role in driving national economic output, fostering innovation, and promoting inclusive development.
What Can Hold India Back?
Despite having achieved the status of being the fourth largest economy in the world, India currently holds a very low position of 63 out of 190 countries on the World Bank’s Ease of Doing Business rankings. The areas keeping India’s ranking so low include contract enforcement (163rd rank) and property registration (154th rank). It could take 58 days and an average of 7.8% of the property value for property registration, which is longer and more expensive than most high-income economies. Plus, commercial disputes could take as many as 1,445 days to get resolved, which is 3x the time taken in high-income economies listed by the OECD.
Ease of Doing Business Can Drive India’s Economic Growth
The private sector has always played a key role in driving an economy. Being profit-driven, they are focused on manufacturing what is most in demand and doing so with the greatest efficiency, with optimal utilisation of resources. These enterprises thrive in a free market economy, which gives the private sector the freedom to make business decisions, use resources and expand. For the next leg of India’s growth, entrepreneurship and innovation must be supported, not by government policy, but by easing control and regulations.
Improving the ease of doing business can significantly propel the country’s economic growth by attracting investments, fostering entrepreneurship, and boosting global competitiveness. Government reforms aimed at easing compliance and reducing bureaucratic hurdles can create a more business-friendly environment, attracting both domestic and foreign investment.
Regulators must take a step back and make it easier for businesses to start, operate and grow. Reducing barriers to entry for new businesses fosters entrepreneurship and innovation, leading to the creation of new jobs and industries. When this happens, India will be better positioned to attract more overseas businesses, integrate better into global supply chains, and become a more competitive player in the global economy.
Businesses flourishing will drive other businesses. The private sector will also invest in infrastructure, education and vocational training, which will further ease business conditions and equip India’s workforce with the skills needed to compete in the global economy.
Although the government is already working on regulatory reforms to reduce bureaucratic hurdles, financial reforms that ease credit availability will be a big help, especially for MSMEs. By identifying and addressing the current challenges faced in business activities, India can accelerate its economic growth and become the third largest economy faster than predicted.
Rakesh Wadhwa. Ever since, I was a school boy, I knew India was on the wrong path. Socialism was just not what we needed to get ahead. Government controlled our travel; government controlled our ability to buy and sell; and government controlled our freedom to move our money. My life has focused on the inherent rights people have. When I was in college, I never understood, what the governments meant by their "socialistic attitude". If people are free to buy, sell and move their capital themselves without any restrictions by state, then the welfare of people is inevitable & hence the countries they live in will become wealthy. The government has no right whatsoever, to point a finger at me or my business. I am not a revolutionary. I just want to light up my cigarette and not get nagged about it. I believe in non-interfering attitude to attain more. 
The Bastiat Award is a journalism award, given annually by the International Policy Network, London. Bastiat Prize entries are judged on intellectual content, the persuasiveness of the language used and the type of publication in which they appear. Rakesh Wadhwa won the 3rd prize (a cash award of $1,000 and a candlestick), in 2006.
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