India is now projected to become a $5 trillion economy only in FY29, a year later than previously estimated, according to the IMF’s latest staff consultation report released on November 26. The delay reflects a combination of slower-than-expected nominal GDP growth and a sharper depreciation of the rupee against the US dollar.
The IMF now expects India to cross the $4 trillion mark in FY26 and reach about $4.96 trillion in FY28, narrowly missing the $5 trillion target. In February 2025, the IMF had forecast India’s GDP at $5.15 trillion in FY28. The latest projection is therefore nearly $200 billion lower.
Compared with the IMF’s 2023 consultation, the gap is even wider. In 2023, the multilateral institution expected India to reach $5.96 trillion in FY28. Under the 2025 projections, the FY28 estimate is nearly $0.5 trillion lower, highlighting how sharply exchange-rate assumptions have shifted in two years.
Rupee depreciation plays a bigger role this time
The weaker dollar-value of India’s GDP is primarily influenced by the rupee assumptions embedded in the IMF’s baseline. The expected exchange rate for FY25 was revised from Rs 82.5 per dollar in 2023 to Rs 84.6 in the 2025 report. For FY26, the IMF projects further depreciation to Rs 87, and Rs 87.7 in FY27. These shifts reduce India’s dollar-denominated GDP.
These currency assumptions significantly shape the timeline for India reaching the $5 trillion threshold. The IMF has also reclassified India’s de facto exchange-rate arrangement as “crawl-like”, instead of “stabilised” earlier.
Nominal GDP growth moderates
The IMF has trimmed rupee-denominated nominal GDP growth projections as well. For FY26, nominal GDP is expected to grow 8.5 percent—lower than the 11 percent forecast in 2024—and 10.1 percent in FY27
Growth in dollar terms is even weaker due to currency effects, at 5.5 percent and 9.2 percent, respectively.
India’s nominal GDP grew only marginally faster than real GDP in Q1FY26 — 8.8 percent versus 7.8 percent — and economists expect the differential to narrow further as inflation remains subdued.
India still among fastest-growing major economies
Despite the delay in reaching $5 trillion, the IMF maintains that India will remain one of the world’s fastest-growing major economies, supported by strong domestic demand and improving structural fundamentals. The staff appraisal notes that India’s outlook could strengthen further if pending trade agreements are concluded and reform momentum continues.
Indian authorities, however, have disagreed with several IMF assumptions. They specifically pushed back against the assumption that recently imposed 50 percent US tariffs on Indian exports will persist indefinitely, calling the estimates conservative.
If the rupee weakens beyond the IMF’s baseline, India’s dollar-GDP trajectory may fall short of current projections, widening the gap between aspiration and statistical outcomes.
The rupee hit an all-time low of Rs 89.49 per dollar on November 21, before closing at Rs 89.23 on November 26.
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