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

The International Monetary Fund expects India to move ahead of Japan into fourth place among the world's largest economies in 2027. In its projections, the fund puts India's nominal GDP at $4.52 trillion that year, while Japan keeps fourth position in 2026 before dropping to sixth, behind India and the United Kingdom.

The fund's Asia-Pacific outlook, presented by Asia Director Krishna Srinivasan, credited India's strong fundamentals, including solid growth, fiscal discipline and ample reserves, with helping it respond to the energy shock from the US-Israel war against Iran. The IMF raised its 2026 growth forecast for India to 7% earlier this week. Japan's outlook is weaker, with growth seen at 0.7% in 2026 as higher energy costs and broader inflation weigh on the economy, and the Bank of Japan has lifted interest rates to a three-decade peak.

Japan also faces an ageing population, while the yen slid to its weakest level in 40 years against the dollar, adding to import costs. On Thursday the Nikkei in Tokyo dropped close to 5% as technology shares tumbled on concerns about whether the AI sector is profitable. Srinivasan said Japan has benefited from the surge in artificial intelligence investment, though by less than its regional neighbours.