India is on course to overtake Japan and Germany to become the world’s third-largest economy by 2028, according to a new report by UBS Global Research. The report attributes this milestone to steady GDP growth averaging 6.5% per year, alongside policy-driven expansion and robust domestic consumption.
UBS also projects that India will emerge as the third-largest consumer market by 2026, reflecting strong demand and a sustained reform momentum.
Growth Outlook and Economic Drivers
UBS Chief India Economist Tanvee Gupta Jain forecasts that India’s real GDP growth will stabilise at 6.4% in FY27 and 6.5% in FY28, supported by:
- Continued economic reforms and industrial deregulation
- A major infrastructure and logistics expansion
- Strengthening manufacturing and technology sectors
The report notes that India’s macroeconomic fundamentals remain stable despite global challenges, aided by sound fiscal management and external balance.
UBS expects the current account deficit to stay around 1.2% of GDP in FY27, within manageable limits, and sees room for one additional 25 bps rate cut before a pause in FY27.
Inflation, Fiscal Trends, and Risks
UBS estimates headline CPI inflation to rise modestly to 4.3% in FY27, mainly due to base effects, remaining below the RBI’s 4.5% projection. Fiscal consolidation is likely to progress gradually, driven by strong tax collections and disciplined spending.
However, the report flags potential headwinds:
- Sustained high trade tariffs (~50%) could lower GDP growth by 50 bps.
- U.S. tax measures on offshore payments might reduce growth by 90 bps.
On the upside, faster AI adoption and deeper structural reforms could lift India’s growth potential to 6.5–7%.
Key Facts
- India to become 3rd-largest economy by 2028 (after the U.S. & China)
- Expected GDP growth: 6.5% (FY28–30E)
- Current account deficit: ~1.2% of GDP (FY27E)
- Inflation forecast: 4.3% (FY27)
- Growth enablers: Infrastructure, deregulation, R&D, AI adoption
- Key Economist: Tanvee Gupta Jain, UBS Chief India Economist
Structural Reform Priorities
UBS underscores the importance of continued reforms in land acquisition, capital markets, and research investment to unlock India’s “new economy” potential. Enhancing productivity, innovation, and labour participation will be vital for sustaining long-term momentum.
Outlook
UBS concludes that India’s path toward becoming the third-largest global economy is anchored in macroeconomic stability, policy reforms, and an expanding middle class. While external risks persist, India’s transformation in energy, infrastructure, and digital sectors positions it as a key global growth driver for the coming decade.