Wednesday, January 25 2006 08:58 Hrs (IST) - World Time -

Houston: India will surpass Japan as the world's third largest economy in 2006 as measured in Purchasing Power Parity (PPP), according to a forecast by a US professional services firm.

India's economy, measured in PPP terms, will eclipse the $4 trillion mark in 2006, making it equal to or greater than Japan's. Only the United States and China will possess larger economies, according to Keystone India's chief economist William T. Wilson.

"The results of liberalizing strategic sectors such as telecom, banking, aviation and real estate are now beginning to show. After growing at 8.5 per cent and 6.9 per cent in 2003 and 2004 respectively, India's economy I expected to grow 7.8 per cent in 2005-2006 (fiscal year ending in March) then decelerate modestly to 7 per cent in 2006-2007. Depending upon the direction of energy prices, inflation is expected to run in the 5-5.5 per cent range for 2006," said Wilson.

Faster growth is expected to boost salaries by an inflation-adjusted 7 per cent this year, fuelling robust consumer spending. The mobile telecom market in India, the fastest growing in the world, is growing at over two million subscribers per month, the chief economist at the Chicago-based firm said.