India is expected to overtake Japan and become the world’s fourth-largest economy by 2026.

India is projected to surpass Japan and become the world’s fourth-largest economy by 2026, according to the PHD Chamber of Commerce and Industry (PHDCCI). This optimistic forecast is supported by strong GDP growth projections and key policy reforms designed to strengthen economic resilience and promote sustainable development.

GDP Growth Projections
PHDCCI forecasts India’s GDP will grow by 6.8% in FY2024-25 and increase to 7.7% in FY2025-26. This growth is expected to boost India’s global economic ranking, enabling it to surpass Japan by 2026.

Tax Reforms to Stimulate Consumption
To boost domestic consumption, PHDCCI recommends raising the income tax exemption limit to ₹10 lakh and applying the 30% peak tax rate only to individuals earning above ₹40 lakh, a significant rise from the current threshold of ₹15 lakh. Additionally, the chamber suggests lowering the tax rate for proprietorships, partnerships, and LLPs from 33% to 25%, aiming to improve business efficiency and increase disposable income.

Monetary Policy Expectations
With Consumer Price Index (CPI) inflation expected to fall between 2.5% and 4%, PHDCCI anticipates the Reserve Bank of India (RBI) may cut the benchmark interest rate by 25 basis points in its next policy review. This reduction is expected to encourage economic growth by lowering borrowing costs.

Key Growth Sectors
PHDCCI highlights several sectors with significant growth potential, including agriculture and food processing, fintech, semiconductors, renewable energy, health, and insurance. The chamber stresses the importance of sustainable development to attract global investment and secure long-term economic progress.

Comprehensive Growth Strategy
To maintain and accelerate economic growth, PHDCCI advocates for a five-pronged approach:

1. Increased Capital Expenditure: Boosting infrastructure and public investment to stimulate economic activity.
2. Enhanced Ease of Doing Business: Simplifying regulatory processes to attract both domestic and foreign investments.
3. Reduction in Business Costs: Implementing strategies to lower operational costs for businesses.
4. Focus on Labour-Intensive Manufacturing: Supporting industries that create significant employment opportunities.
5. Greater Integration into Global Value Chains: Strengthening participation in international trade to increase exports.