India expected to overtake Japan as world's 4th largest economy in 2027: IMF

The International Monetary Fund projects India will surpass Japan as the world's fourth-largest economy by 2027, according to its latest Asia-Pacific economic outlook. While Japan maintains its fourth-place ranking this year with a nominal GDP of $4.52tn, India is expected to claim the spot in 2027, with its GDP reaching that same figure.

The IMF expects India's growth to accelerate to 7.0% in 2026, outpacing Japan's projected slowdown to 0.7%. Japan's challenges include an aging population and structural issues that have stifled its growth, while India enters the current economic turmoil from a strong position. The Asian country boasts solid fundamentals, strong fiscal discipline, and substantial foreign reserves.

India's resilience during the energy price shock caused by the US-Israel conflict with Iran has been notable, with the nation benefitting from robustness in growth, prudent fiscal management, and ample reserves. Meanwhile, Japan faces further challenges from rising energy prices and inflation, which have led to the Bank of Japan raising interest rates to a three-decade high.

The yen's significant depreciation against the dollar has also contributed to higher import costs. The IMF acknowledges Japan's potential in artificial intelligence investments, but attributes slower growth to Japan's aging population and related economic headwinds.