India's economy will surpass Japan's to become the world's third largest economy within 25 years, according to a research report released Tuesday.

The India Century report from economist William Wilson says that by 2030, India's economy will be smaller than only the United States' and China's. India now has the world's fourth largest economy.

Many high-tech companies in the Austin area -- notably Dell Inc. (Nasdaq: DELL) -- have set up shop in India over the past several years, primarily to take advantage of lower labor costs.

"Demographics and economic reform are driving India's growth," Wilson says. "With half the population under the age of 25, India will have the youngest labor force in the world, and its population is expected to exceed China's by 2030."

Wilson, former chief economist for Ernst & Young LLP, is the chief economist for Keystone Business Intelligence India. The firm provides deal-negotiating, consulting and asset management services for clients in the United States and India.

Keystone is based in Chicago and has offices in Detroit, New York, Salt Lake City, San Francisco and Washington, D.C.