Friday 16 / October / 2026
BANGKOK: India is projected to overtake Japan and become the world’s fourth-largest economy by 2027, with its nominal gross domestic product (GDP) reaching $4.52 trillion, according to International Monetary Fund (IMF) projections released on Thursday (October 15).
Japan, currently the world’s fourth-largest economy, is expected to fall to sixth place in 2027, slipping behind both India and the United Kingdom, highlighting the contrasting economic trajectories of the two Asian nations.
India has maintained strong economic growth in recent years despite global uncertainties. The IMF this week raised its forecast for India’s economic growth in 2026 to 7 per cent, reflecting the country’s resilience amid challenging international conditions.
Japan, meanwhile, continues to face structural challenges, including an ageing population, weak economic growth and rising living costs. The IMF projects Japan’s economy will expand by just 0.7 per cent in 2026.
The United States remains the world’s largest economy, followed by China and Germany.
Speaking at the release of the IMF’s regional economic outlook for Asia and the Pacific, the fund’s Asia Director, Krishna Srinivasan, said India was relatively well positioned to withstand the current energy price shock triggered by the US-Israel war on Iran.
“India entered this with very strong fundamentals,” Srinivasan said, pointing to the country’s robust growth, fiscal discipline and substantial foreign exchange reserves. He added that these strengths had helped India respond effectively to the economic shock.
Japan, by contrast, has been particularly vulnerable to rising energy prices and broader inflationary pressures. The Bank of Japan has raised interest rates to their highest level in three decades as the country grapples with sustained increases in consumer prices.
Japan had struggled with deflation for years before consumer prices began rising consistently in the spring of 2022. The surge in energy prices linked to the conflict involving Iran has added to inflationary pressures, increasing costs for households and businesses.
The yen’s weakness has compounded the problem by making imported goods and energy more expensive. The currency fell to its lowest level against the US dollar in four decades over the summer, further straining Japan’s import-dependent economy.
Demographic pressures are also weighing on Japan’s growth prospects, as its ageing population constrains economic activity and reduces the available workforce.
Srinivasan said Japan was benefiting from increased investment in artificial intelligence, but the gains were less pronounced than in some neighbouring economies.
Meanwhile, Japanese equities came under pressure on Thursday, with the benchmark Nikkei index falling nearly 5 per cent. Technology stocks led the decline amid growing concerns about whether heavy investment in artificial intelligence would generate sufficient returns.
The diverging outlooks underscore India’s rising position in the global economy as Japan confronts persistent demographic and structural challenges. However, the IMF’s projections remain forecasts and could change as economic conditions, currency movements and global energy prices evolve.
