India’s Economy Climbs World Power Ranking at Japan’s Expense

It’s only a matter of time before India overtakes Japan as the world’s fourth-largest economy, experts say, with some predicting the milestone could come within two years.

Japan’s economy stood at $4.22 trillion in 2023, just ahead of India’s $3.55 trillion.

“Based on our existing forecasts, we had expected India to overtake Japan in 2026,” Marcel Thieliant, head of Asia-Pacific for Capital Economics, told the Japan Times.

The International Monetary Fund (IMF) forecasts India’s real GDP growth, which accounts for inflation, at 7 percent for 2024, following 8.2 percent in 2023 and 7 percent in 2022. Growth is expected to remain strong at 6.5 percent annually in 2025 and 2026.

Japan faces a bleaker outlook. The IMF projects Japan’s economy will grow by just 0.3 percent this year, down from 1.7 percent in 2023 and 1.2 percent in 2022. Japan continues to grapple with structural challenges.

Inflation, a weak yen, and slow growth remain prominent concerns for voters and policymakers alike. These issues were central to last month’s snap election called by Japanese Prime Minister Shigeru Ishiba, in which the coalition led by his Liberal Democratic Party lost power for the first time in over a decade. Despite this setback, Ishiba managed to hold on to his post in a parliamentary run-off vote on Monday.

Meanwhile, India’s medium-term prospects appear robust, with sectors like trade, agriculture and artificial intelligence driving growth.

“India is poised for growth, and with a young and dynamic workforce, [it is] well-positioned to shape the global economic landscape,” Abhishek Tomar of S&P Global India Leadership Council said in a September press release.

S&P Global predicts that India could rise even further, becoming the world’s third-largest economy by 2030 or 2031.

Newsweek reached out to the Japanese and Indian foreign ministries with emailed requests for comment outside of office hours.

The United States, still the world’s largest economy, is forecast to achieve 2.8 percent GDP growth this year, slowing to 2.2 percent by 2025.

However, it remains to be seen how the economic policies of Donald Trump, who will begin his second term as U.S. president in January, could affect global trade dynamics. Trump’s proposed tariffs, including a potential 60 percent levy on Chinese imports, would weigh on targeted economies but also increase costs for American consumers.

China, which overtook Japan as the world’s second-largest economy in 2010, is forecast to see growth of 4.8 percent this year, the IMF forecasts, a figure in line with the Chinese Communist Party’s 5 percent target.

Meanwhile, Germany, the world’s third-largest economy, is projected to post zero growth in 2024, following a -0.3 percent contraction last year. The IMF predicts the European powerhouse will regain some steam with 0.8 percent growth in 2025, though it may face headwinds if political instability continues.

While India is set to eclipse Japan in overall economic size, the South Asian country has a ways to go to close the gap when it comes to the average standard of living.

India’s GDP per capita is estimated at $2,700 in 2024, far below Japan’s $39,000. Even when adjusted for purchasing power parity (PPP), India lags behind, with $11,110 per capita compared to Japan’s $53,060.