India is projected to become the world’s fourth-largest economy in 2027, overtaking Japan, according to International Monetary Fund (IMF) projections released on Thursday.
India’s nominal gross domestic product (GDP) is expected to reach $4.52 trillion in 2027, while Japan is projected to slip to sixth place, behind India and the United Kingdom.
The ‘s projections point to contrasting economic trajectories in Asia, with India maintaining strong growth momentum while Japan grapples with structural challenges, including an ageing population and rising import costs, AFP reported.
IMF raises India’s economic growth forecast to 7%
The IMF this week raised its forecast for in 2026 to 7%, despite global economic headwinds.
Speaking at the release of the IMF’s regional economic outlook for Asia-Pacific, the fund’s Asia Director Krishna Srinivasan said India entered the current energy price shock triggered by the US-Israel war on Iran with strong economic fundamentals.
He cited robust growth, fiscal prudence and substantial foreign exchange reserves as factors that had helped the country respond to the shock.
, meanwhile, is projected to grow by just 0.7% in 2026. Rising energy prices and broader inflationary pressures have weighed on the country, prompting the Bank of Japan to raise interest rates to their highest levels in three decades.
Why Japan is projected to drop to sixth place
Japan, which grappled with deflation for years, has experienced sustained consumer price increases since the spring of 2022. Higher energy prices linked to the Iran war have added to inflationary pressures, while the yen’s weakness against the dollar has increased the cost of imports.
The country’s ageing population is another constraint on economic activity.
Srinivasan said Japan was benefiting from increased investment in artificial intelligence, although the gains were smaller than those seen in some regional economies.
US remains world’s largest economy
Japan’s benchmark Nikkei index fell nearly 5% on Thursday, dragged down by technology stocks amid concerns about the profitability of the AI sector.
The United States remains the world’s largest economy, followed by China and Germany.