India poised to become world’s third-largest consumer market by 2026, says report

Based on its current growth rate, India is expected to become the world's third-largest consumer market in 2026 and the third-largest economy by 2028, according to a UBS report. Currently, the US and China are in first and second place, respectively.

Strong Household Consumption Driving Growth

According to the report, "India's household consumption nearly doubled in the past decade to $2.4 trillion in 2024, recording a 7.9 per cent CAGR, stronger than China, the US and Germany. Our estimates indicate India's consumer market is on track to become the world's third largest in 2026, well before its GDP does by 2028."

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India to Remain Fastest-Growing APAC Economy

India's real GDP growth is expected to stabilise at 6.4 per cent in FY2027 and 6.5 per cent in FY2028, driven by supportive policies and strong domestic demand. This will make it the fastest-growing economy in the Asia Pacific (APAC) region in 2027, followed by the Philippines (GDP growth of 6.1 per cent) and Indonesia (at 5.1 per cent), the report said.

Slower Growth Expected in the US and China

The report further said that in the case of the US, the GDP growth rate is expected to decline from 1.9 per cent in 2025 to 1.7 per cent in 2026 and reach 1.9 per cent in 2027. Real GDP growth in China is expected to slow to 4.5 per cent in 2026 (from 4.9 per cent in 2025), as the Asian giant's exports are expected to decline.

Trade and Policy Risks Could Weigh on Outlook

However, UBS's growth forecast for India is subject to downside risks due to uncertainty related to US trade policy and India's policy response.

First, if the Donald Trump administration's 50 per cent trade tariffs continue, it could reduce growth by about 50 basis points in FY27 and adversely impact employment, consumption and business confidence, as well as investment.

Secondly, the imposition of a 25 per cent tax on payments made by US companies for overseas outsourcing services could reduce India's growth rate by about 90 basis points in FY27, the report said.

RBI Likely to Cut Rates to Support Growth

UBS also expects the Reserve Bank of India (RBI) to cut rates by 25 basis points during the current fiscal year ending March 31, 2026, to boost growth.

With IANS Inputs