India to overtake Japan as world’s fourth-largest economy by 2027: IMF

India is projected to overtake Japan and become the world’s fourth-largest economy by 2027, with its nominal gross domestic product (GDP) expected to reach $4.52 trillion, according to International Monetary Fund (IMF) projections released on Thursday.

Japan, currently the world’s fourth-largest economy, is expected to fall to sixth place, behind India and the United Kingdom, the projections showed.

The shift reflects contrasting economic outlooks for the two Asian economies. India has maintained strong growth despite global economic uncertainty, while Japan continues to face sluggish growth, an ageing population and rising import costs.

The IMF this week raised its forecast for India’s economic growth in 2026 to 7 per cent.

Japan’s economy, meanwhile, is projected to grow by just 0.7 per cent in 2026. Higher energy prices and broader inflationary pressures have added to the country’s economic challenges, prompting the Bank of Japan to raise interest rates to their highest level in three decades.

Japan has experienced sustained consumer price increases since the spring of 2022, ending a prolonged period in which deflation had been a major concern. The surge in energy prices linked to the Iran war has added to inflationary pressures.

A weaker yen has also increased the cost of imports. The currency fell to its lowest level against the US dollar in 40 years over the summer, further straining households and businesses.

Japan’s ageing population is another factor weighing on economic activity.

The United States remains the world’s largest economy, followed by China and Germany.