India is projected to overtake Japan and become the world's fourth-largest economy by nominal GDP in 2027, according to the International Monetary Fund's latest World Economic Outlook, even as the two Asian economies move along sharply divergent growth paths.

The IMF estimates India's nominal GDP will reach $4.52 trillion in 2027, placing it fourth globally behind the United States, China and Germany. Japan, which will remain fourth in 2026, is projected to slip to sixth place with GDP of $4.47 trillion, behind both India and the United Kingdom.

The IMF has raised India’s growth forecast to 7% for both 2026-27 and 2027-28, up from 6.5% and 6.7% respectively in its July update. It said India remains among the fastest-growing major economies, supported by resilient private consumption, expanding services activity, favourable demographics, a large domestic market and ongoing structural reforms.

Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, said India entered the energy-price shock triggered by the US-Israel war on Iran from a position of strength.

“India entered this with very strong fundamentals,” he said. “Growth was strong, fiscal prudence was pretty much enshrined, they had lots of reserves and so on. And so in that context, they have responded well to the shock.”

The Fund also said India’s first-quarter performance in the current fiscal year was stronger than anticipated, prompting the upward revision.

It added that recent pressure on the rupee should not be read as evidence of economic weakness, since exchange rates are influenced by global interest rates, investor sentiment and oil prices.

Japan’s economy is expected to grow just 0.7% in 2026, weighed down by higher energy prices, persistent inflation and structural constraints. The Bank of Japan has raised interest rates to their highest level in three decades as consumer prices have risen steadily since spring 2022.

The fall of the Yen, which touched its weakest level in 40 years against the dollar over the summer, has further increased import costs, while Japan’s ageing population continues to constrain labour supply and long-term growth.

The IMF projects Japan's nominal GDP at $4.34 trillion in 2026, ahead of the United Kingdom’s $4.27 trillion and India’s $4.06 trillion. But in 2027, the UK is forecast at $4.49 trillion, just ahead of Japan’s $4.47 trillion, with India at $4.52 trillion.