After significant accelerations in economic growth recently, India’s economy is expected to equal or surpass Japan as the world’s third largest sometime in 2006, an economist has said.

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According to William Wilson, chief economist for Keystone India, India’s economy, measured in PPP terms, will eclipse the US$4 trillion mark in 2006, making it equal to or greater than Japan’s.  Only the United States and China will possess larger economies.


“The results of liberalising strategic sectors such as telecom, banking, aviation and real estate are now beginning to show,” said Wilson.


After growing at 8.5% and 6.9% in 2003 and 2004 respectively, India’s economy is expected to grow 7.8% in 2005-2006 (fiscal year ending in March) then decelerate modestly to 7% in 2006-2007.  Depending upon the direction of energy prices, inflation is expected to run in the 5-5.5% range for 2006.


Faster growth is expected to boost salaries by an inflation-adjusted 7% this year, fuelling robust consumer spending.  The mobile telecom market in India, the fastest growing in the world, is growing at over 2 million subscribers per month.

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Motor vehicles sales, which surpassed the one million mark last year, are expected to continue registering double-digit growth over the next few years.


The housing market, expanding at a 10-15% annual clip, is expected to remain robust in 2006.


A number of hurdles do lie ahead.  The outcome of state elections in 2006 will play a significant role in determining the health of the coalition government at the federal level.


Higher energy prices are also hurting. India currently imports 70% of its petroleum.