India set to become the fourth-largest economy by 2026, PHDCCI report says

India will become the fourth-largest economy by 2026 propelled by robust economic fundamentals and a dynamic business environment, said the industry body PHDCCI in a report.

The report, titled Economic Outlook 2025, also pointed out that India will remain the most resilient economy among the top ten leading economies in the next three years (2025-2027). According to the findings of the report, India leads cumulatively across all lead indicators among the world’s top ten major economies, highlighting the prudent, transformative and well-structured policies propelling India’s accent to a prominent position.

“With the Indian economy growing resiliently over the past three years, the economy is expected to become the fourth largest economy in the world by 2026, surpassing Japan,” said Hemant Jain, president, PHD Chamber of Commerce and Industry.

“Amid this challenging external landscape, India's geopolitical significance is growing significantly, earning appreciation from international institutions,” Jain pointed out.

Jain said India is making significant strides in its futuristic growth trajectory, and the GDP in the current financial year (2024-25) is expected to expand by 6.8% and by 7.7% in FY2025-26.

“India's growth is attributed to deeper integration into global supply chains, a dynamic innovation ecosystem and improved export competitiveness, while the government's efforts to rationalise expenditures and revenues aid in fiscal consolidation. This stands in contrast to many economies grappling with low growth and high debt levels. Moreover, India has become an attractive and investment-friendly destination,” said Ranjeet Mehta, CEO and Secretary General, PHDCCI.

The PHDCCI analysis has looked into past Performance (2022-2024) and the futuristic outlook (2025-2027). India ranks first in GDP growth in the past performance (2022-2024) and in the futuristic outlook (2025-2027), among the top 10 economies, according to the report. The inflation trajectory is expected to be around 4.5% (average) for the current financial year and 4% (average) for the next financial year (2025-26), the report pointed out.

India is expected to lead export growth among the top ten economies, for the futuristic outlook (2025-2027), improving from its second rank in past performance (2022-2024), supporting India's ambitious target of $2 trillion exports by 2030, according to the report.

The report further points out that the country is anticipated to maintain a continuous momentum in investments and savings, at around 33% and 32% of GDP, respectively, highlighting the government's commitment to fostering a favourable investment environment and a greater investor-friendly ecosystem for businesses.

PHDCCI reported that India established a milestone in its FDI journey in 2024 as cumulative (2000-2024) FDI inflows touched $1 trillion and exceeded $40 billion in the first half of the current financial year (2024-2025).

Nearly 70% of this cumulative FDI has been accumulated in the recent decade, facilitated by government proactive policy initiatives and liberalised FDI guidelines, said the industry body PHDCCI.

On fiscal discipline, the industry body said that the government’s commitment to maintaining financial discipline is highlighted from steady second rank in India’s Debt-to-GDP ratio in past performance (2022-2024) and the futuristic outlook (2025-2027).