India on Track to Become World’s Third-Largest Economy by 2028: UBS

India is poised to overtake Japan and Germany to become the “world’s third-largest economy by 2028”, supported by steady GDP growth of “6.5% annually”, according to a new report by “UBS Global Research”. The country is also expected to become the “third-largest consumer market by 2026”, reflecting robust domestic demand and policy-driven growth momentum.

Growth Outlook and Economic Drivers

UBS Chief India Economist “Tanvee Gupta Jain” projects that India’s “real GDP growth will stabilise at 6.4% in FY27” and “6.5% in FY28”, driven by continued reforms, an infrastructure push, and resilient consumption. The report highlights that India’s macroeconomic stability remains intact despite global headwinds, thanks to strong external balances and fiscal discipline.

Key supportive policies include:

* Simplification and deregulation of industrial policies
* Expansion of infrastructure and logistics networks
* Incentives for manufacturing and technology-driven sectors

UBS expects India to maintain a “current account deficit of around 1.2% of GDP in FY27”, well within comfort levels, and sees room for “one more 25-basis-point rate cut” before a pause in FY27.

Inflation, Fiscal Trends, and Risks

The report forecasts “headline CPI inflation rising to 4.3% in FY27”, mainly due to base effects but still below the “RBI’s 4.5% estimate”. Fiscal consolidation is likely to continue gradually, supported by strong tax revenues and controlled spending.

However, UBS cautions that sustained high “trade tariffs (around 50%)” could trim GDP growth by “50 basis points”, while new “U.S. tax measures” on offshore payments could reduce growth by “90 bps”. Conversely, “faster AI adoption” and deeper “structural reforms” could lift India’s potential growth to “6.5–7%”.

Exam Oriented Facts

• India to become 3rd-largest economy by 2028 (after U.S. & China).
• Expected GDP growth: 6.5% (FY28–30E).
• Current account deficit: ~1.2% of GDP (FY27E).
• Inflation forecast: 4.3% in FY27, below RBI’s 4.5% projection.
• Top growth enablers: Infrastructure, deregulation, R&D, and AI adoption.
• Key economist: Tanvee Gupta Jain, UBS Chief India Economist.

Structural Reform Priorities

UBS emphasises the need for sustained reforms in “land, capital markets, and research investment” to unlock India’s “new economy” potential—particularly in manufacturing, digital services, and renewable energy. Strengthening productivity through innovation and labour participation will be critical to sustaining momentum.

Outlook

UBS concludes that India’s trajectory toward becoming the “third-largest global economy” is underpinned by macro stability, a reform-driven policy environment, and its expanding middle class. While global risks persist, India’s domestic resilience and ongoing transformation in energy, infrastructure, and digital ecosystems position it as a pivotal growth engine for the decade ahead.