NEW DELLHI: India's gross domestic product could soon become larger than Japan's, making it the world’s fourth-largest economy, according to a Japanese media report on Thursday.
The article, published in Japan Times, is based on discussions with some economists from Japan including Marcel Thieliant, head of Asia-Pacific for Capital Economics.
"Based on our existing forecasts, we had expected India to overtake Japan in 2026. The forecasts are currently being reviewed in light of recent events, " the news item cited Thieliant as saying.
The International Monetary Fund sees the switch happening in 2025. S&P Global Ratings is looking at 2030 for the two countries to swap places, the article states.
According to economists, the factors that are working in India’s favour is that the country has steadily climbed in terms of economic potential since around 2000 and its GDP has already surpassed that of the UK in 2022. India now trades with 27 countries using its rupee instead of the dollar, highlighting its expanding influence in global trade. The country also accounts for 46 per cent of global digital transactions. India’s population growth and young demographics are the key drivers to economic expansion that remains indisputable.
The IMF predicts India's nominal GDP is projected to hit $4.339 trillion by 2025, surpassing Japan’s $4.310 trillion. This outlook underscores India's strong growth trajectory, marking a significant lead over Japan.
Economists point out that Japan, on the other hand, has been consistently grappling with recurring recessions and decades-long deflation. Japan’s woes are exacerbated by its ageing population and low productivity across sectors. A weakened yen also significantly impacts the far-eastern country’s standing in these rankings. Besides, structural reforms have failed in Japan due to resistance to change and digitalisation. Long-standing employees often favour traditional methods over new approaches.
In 2023, Japan’s growth lagged at 1.9 per cent after decades of stagnation. IMF projects it to be just 0.3 per cent growth in 2024. The economies of China and Germany have already surpassed Japan, which had held the 2nd undisputed global rank till 2010.
India's influence in multilateral diplomacy, and global and regional security in the last decade is an indication of the nation’s trajectory as an economic force. India has also surpassed Japan to become 3rd largest power in Asia power index reflecting its increasing geopolitical stature. "India is outshining its advanced peers in terms of economic capability, military capability, and diplomatic influence. What is heartening is that the county is almost set to surge past Japan to claim the fourth spot globally, defying the timelines of global projections by multilateral agencies with its rapid growth, " a senior official remarked.