IMF: India will surpass Japan to become the 4th largest economy by 2025

India's nominal GDP will surpass Japan in 2025 to become the world's fourth largest economy, one year earlier than previously forecast.

In a report published on April 21, the International Monetary Fund (IMF), estimated that India's nominal GDP could reach nearly 4.34 trillion USD by 2025. Meanwhile, this figure for Japan is about 4.31 trillion USD.

In October, the IMF forecast that India would surpass Japan in 2026. In the April update, the organization slightly adjusted the GDP growth forecast of both countries in terms of local currencies. However, the devaluation of the yen seems to reduce the value of the Japanese economy if measured in USD.

Last year, Germany overtook Japan as the world's third largest economy. If overtaken by India, the country will drop to fifth place.

The value of the (Indian) rupee against the USD has been largely unchanged since early 2023 because of what appears to be intervention by the Reserve Bank of India. Currently 83 rupees can be exchanged for 1 USD.

In its December 2023 report on India, the IMF noted that government intervention in currency markets may exceed what is necessary. The country's central bank countered that the IMF was making a flawed analysis based solely on short-term exchange rate trends.

India's nominal GDP ranked 10th in the world as of 2014. According to the IMF, the country is expected to surpass Germany to become the world's third largest economy by 2027. India has surpassed Japan in automobile sales domestic market by 2022 to become the third largest market for cars, after China and the US.

Although India faces many difficulties during COVID-19, the economy has still recorded high growth in recent years thanks to population growth. The Reserve Bank of India expects GDP to grow 7% in real terms in fiscal 2024.

India's growth is forecast to accelerate in the coming years thanks to the push of consumption and investment from both domestic and foreign businesses and exports. The Make in India program, coupled with many companies looking to leave China, will boost India's manufacturing sector further. In addition, the service segment is also boosted by rapid population growth.

The country's GDP growth is expected to average more than 6% per year until 2028, among the highest in Asia, but the country is confident it can accelerate to 7% thanks to the strength of the financial and economic sectors. recent reforms.

Additionally, with reasonable assumptions about inflation and exchange rate differences, India could become a $7,000 billion economy within the next 6-7 years. This is also similar to the IMF's previous assessment that India will be the bright spot of the Asian economy with stable growth at 6.5% in the 2024-2025 period.

Previously, S&P Global also assessed that India will continue to grow in the next three years and lead growth in the region. The organization forecasts India's GDP to grow at 6.5% in fiscal 2025 and 7% in 2026.