The International Monetary Fund (IMF) has recently updated its World Economic Outlook (WEO), revealing that India has dropped from being the world’s fourth-largest economy to the sixth position. Projections indicate that by 2026, India’s gross domestic product (GDP) will reach approximately $4.15 trillion, a modest increase from $3.92 trillion in 2025. In contrast, the United Kingdom’s GDP is forecasted to rise to $4.27 trillion in 2026, while Japan’s GDP is expected to decline from $4.48 trillion in 2025 to $4.38 trillion in 2026.
The shift in India’s economic standing was a cause for celebration in September 2022 when it surpassed the UK to claim the fifth spot, a significant milestone considering the historical context of British colonialism in India. At that time, analysts anticipated that India’s rapid growth, coupled with stagnation in Germany and Japan, would enable it to overtake Germany by 2029. However, recent developments led to Germany surpassing Japan before India could make that leap.
In May of the previous year, BVR Subrahmanyam, the CEO of Niti Aayog, announced that India had moved ahead of Japan to become the fourth-largest economy. Nevertheless, India has now experienced a decline, slipping to the sixth position.
This unexpected change stems from two key factors affecting the IMF’s GDP calculations, which are based on local currency values and their respective exchange rates with the US dollar. In the past year, India has encountered significant setbacks on both fronts.
Firstly, India revised its GDP estimates in February, revealing that previous figures were overly optimistic. The updated estimates indicated a reduction in India’s GDP for the fiscal year 2025-26, decreasing from Rs 357 trillion to Rs 345 trillion.
Secondly, the exchange rate between the Indian rupee and the US dollar has deteriorated sharply over the past year. This depreciation occurred alongside a decline in the dollar’s value against other currencies, such as the British pound and the Japanese yen. Consequently, when the IMF recalculated GDP in dollar terms, the disparity between India’s GDP and that of the UK and Japan widened further.
For instance, India’s GDP for 2025 decreased from an earlier estimate of $4.1 trillion to $3.9 trillion according to the revised figures. This reduction allowed Japan to surpass India, despite the fact that Japan’s GDP for 2026 is lower than what it was in 2022.
Looking ahead to 2026, the UK is also projected to surpass India for similar reasons.
The current economic landscape reveals a stark contrast between the top two economies and the rest of the world. The United States is expected to have a GDP of $32.38 trillion in 2026, while China is projected at $20.85 trillion. The US economy alone surpasses the combined GDP of all European nations, while China exceeds the total GDP of all European Union member states.
However, following these two leading economies, the next four contenders are closely grouped around the $4 trillion range. According to IMF forecasts, despite the setback in 2026, India is expected to regain its position as the fourth-largest economy by 2027, with an anticipated overtaking of Germany to become the third-largest economy by 2031.
Udit Misra serves as a Senior Associate Editor at The Indian Express and has been covering the Indian economy and policy landscape for over twenty years. He holds a Master’s degree in Economics from the Delhi School of Economics and is a Chevening South Asia Journalism Fellow from the University of Westminster.
Known for his explanatory journalism, Misra is a trusted source among readers for clarifying complex economic concepts and interpreting economic news from India and abroad.
His professional contributions include three regular columns for the publication: “ExplainSpeaking,” which addresses crucial questions related to economic and policy developments; “GDP (Graphs, Data, Perspectives),” which provides insights through data and charts; and “Book, Line & Thinker,” a biweekly column reviewing both new and classic literature.
Recent articles by Misra have focused on the depreciating Indian rupee, the global implications of US economic policies, and long-term growth projections for India:
Noteworthy articles include “GDP: Anatomy of rupee weakness against the dollar,” which explores the factors behind the rupee’s decline despite India’s rapid economic growth, and “ExplainSpeaking: How Trump’s tariffs have run into an affordability crisis,” which discusses the implications of US trade policies.
In addition, Misra has examined the impact of new labor codes on India’s weaker states and critically assessed high-growth projections made by officials, including a recent declaration that India will become a $30 trillion economy in 25 years.
