IMF backs India's revised GDP methodology, projects it to overtake Japan as 4th-largest economy in 2027
India is projected to become the world's fourth-largest economy in 2027, overtaking Japan, according to International Monetary Fund (IMF) projections released on Thursday.
The IMF's outlook comes as it endorsed India's revised GDP calculation methodology, describing the changes as consistent with international best practices and advice provided by its statistics department, AFP reported.
Krishna Srinivasan, director of the IMF's Asia and Pacific Department, 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.
He added that India had issued a note explaining the changes to its GDP methodology, while noting that there was still room for further improvement.
The IMF's endorsement comes amid a political row over India's stronger-than-expected GDP growth figures. The economy grew 7.8% in the June quarter, according to data released by the Union government last month, prompting questions from former finance secretary S C Garg about the credibility of the figures.
Garg alleged that the growth rate had been artificially boosted by compressing the previous year's figures. Opposition parties subsequently questioned the integrity of the government's GDP data.
Chief Economic Adviser V Anantha Nageswaran rejected Garg's approach as "cherry-picking" of data. He said the latest GDP 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.
The IMF this week raised its forecast for India's economic growth in 2026 to 7%, despite global economic headwinds.
The IMF's Regional Economic Outlook for Asia and the Pacific, released on Thursday, identified India among emerging economies whose currencies came under pressure following the energy shock. It noted that the pressure had partly eased in recent months and that India was among the economies that intervened in foreign exchange markets.
Japan, meanwhile, is projected to grow by just 0.7% in 2026, with rising energy costs, inflationary pressures and an ageing population weighing on its economic outlook. The IMF projects that Japan will slip behind India and the United Kingdom in the global GDP rankings in 2027.
Japan, which grappled with deflation for years, has experienced sustained consumer price increases since the spring of 2022. Higher energy prices linked to the Iran war have added to inflationary pressures, while the yen's weakness against the dollar has increased the cost of imports.
The country's ageing population is another constraint on economic activity.
Srinivasan said Japan was benefiting from increased investment in artificial intelligence, although the gains were smaller than those seen in some regional economies.
The United States remains the world's largest economy, followed by China and Germany.
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