India set to become 4th-largest economy

India is set to become the world’s fourth-largest economy in 2027 by overtaking Japan, with its gross domestic product (GDP) projected to reach $4.52 trillion, according to the International Monetary Fund (IMF).

The IMF said Japan would retain its fourth position in 2026 before India moves ahead the following year, pushing Japan down to sixth place behind India and the United Kingdom.

The forecast highlights contrasting economic trajectories in Asia, with India maintaining strong growth momentum while Japan faces structural challenges, including an ageing population and rising energy costs.

The IMF has raised India’s economic growth forecast for 2026 to 7 per cent, reflecting the country’s resilience amid global economic uncertainties.

Krishna Srinivasan, the IMF’s director for Asia and the Pacific, said India had entered the recent energy price shock from a position of strength, supported by robust growth, fiscal discipline and substantial reserves.

In contrast, Japan’s economy is projected to grow by just 0.7 per cent in 2026 as higher energy prices and persistent inflation weigh on economic activity.

Japan has also faced pressure from a weakening yen, which has increased import costs. The country’s ageing population continues to constrain economic activity, although investment in artificial intelligence is providing some support to growth.