The United States remains the world’s largest economy, followed by China and Germany. India’s projected rise in the rankings comes as Japan faces slower growth, rising energy costs and demographic challenges.
Japan’s economy is projected to grow by just 0.7% in 2026, according to the IMF. The country has experienced sustained consumer price increases since spring 2022 after years of deflation, while higher energy prices linked to the Iran war have added to inflationary pressures.
The weakness of the yen against the US dollar has also increased import costs, putting additional pressure on the Japanese economy. Its ageing population remains another constraint on economic activity.
Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, said Japan was benefiting from increased investment in artificial intelligence, although the gains were smaller than those seen in some regional economies.
IMF endorses India’s revised GDP methodology
Separately, the IMF welcomed India’s revised gross domestic product (GDP) calculation methodology, describing the changes as consistent with international best practices and advice provided by its statistics department.
Srinivasan called the revision a “welcome development” and commended the Ministry of Statistics and Programme Implementation (MoSPI) for improving the country’s GDP statistics.
“These revisions to the methodology are entirely consistent with the advice we've been giving them, including from our statistics department,” Srinivasan told reporters in Bangkok on Thursday, according to AFP.
He noted that India had issued a note explaining the methodological changes, while adding that there was still room for further improvement.
The IMF’s endorsement comes amid debate over India’s stronger-than-expected growth figures. The country’s economy expanded 7.8% in the June quarter, according to government data released last month, triggering questions from former finance secretary S C Garg about the credibility of the figures.
Garg alleged that the reported growth rate had been artificially boosted by compressing the previous year’s figures. Opposition parties also questioned the integrity of the GDP data.
Chief Economic Adviser V Anantha Nageswaran rejected the criticism as “cherry-picking”. He said the latest figures were calculated using the financial year ending March 2023 as the new base year, with methodological changes also leading to revisions in quarterly growth data for the previous year.
India’s projected rise in global economic rankings and the IMF’s higher growth forecast underline its strong economic outlook. However, the debate over GDP estimates also highlights the importance of transparent methodology and reliable data as the country’s global economic standing expands.