PHDCCI: India to Overtake Japan as the Fourth-largest Economy by 2026

Industry group PHDCCI stated Wednesday that India's GDP would rise 6.8 percent in the current fiscal year ending in March and 7.7 percent in FY26, making it the fourth largest economy in the world by 2026, surpassing Japan.

According to Hemant Jain, President of the PHD Chamber of Commerce and Industry, India's economy has grown steadily over the last three years and is predicted to overtake Japan as the world's fourth largest economy by 2026.

The industry chamber also stated ahead of the budget that the income tax exemption limit should be raised to Rs 10 lakh, while the peak rate of income tax, which is currently 30 percent on income over Rs 15 lakh, should only be applied to individuals with income over Rs 40 lakh. The chamber argued that this would increase consumption by giving people more disposable income.

In addition, the PHD Chamber of Commerce and Industry (PHDCCI) anticipates that the Reserve Bank will cut the benchmark interest rate by 25 basis points in its policy review next month, which will result in a significant decrease in Consumer Price Index (CPI) inflation.

"Technically, we anticipate a 25 basis point drop in the next policy because, although our CPI inflation is already declining, some food prices are still high due to obstacles like fog or the ongoing monsoon situation. However, we anticipate that CPI inflation would drop considerably in the upcoming quarters, reaching a level of roughly 4 to 2.5 percent," PHDCCI Deputy Secretary General S P Sharma stated during a press conference held here.

"Rs15 lakh is the middle income, and we are imposing the peak tax rate if you go by the advanced economies numbers," he said in response to a question about the steps the parliament had proposed in the budget to increase consumption through more disposable income. Therefore, we have recommended that this peak rate be applied at least to incomes exceeding Rs 40 lakh. Such middle-income salaries shouldn't have a peak rate, and if we are a consumption economy, the peak rate shouldn't be more than 25%."

The chamber stated in a statement that, against the backdrop of global instability and difficulties, the Indian economy is a shining example of resilience.

"While many of the world's leading economies are grappling with slowing growth, India has demonstrated remarkable progress, fuelled by solid macroeconomic fundamentals and proactive government reforms," it said.

The nation has gained international recognition as an alluring investment destination by improving company efficiency and cultivating an environment that is conducive to investment. According to the industry group, PHDCCI forecasts GDP growth of 6.8% in the current fiscal year (FY2024–25) and 7.7% in FY 2025–2026.

Looking ahead, India should concentrate on promising sectors like agriculture and food processing, fintech, semi-conductor, renewable energy, health and insurance, and a commitment to sustainable development, according to PHDCCI, which projected that the inflation trajectory would be approximately 4.5% for the current fiscal year (FY2024–25).

"Last but not least, we suggest a five-pronged comprehensive strategy, including increased capital expenditure, enhanced ease of doing business, reduction in the cost of doing business, focus on labour-intensive manufacturing and greater integration in global value chains, to lead India's growth trajectory to higher growth in the coming years," stated the industry association.