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India's GDP to hit $5 trillion in FY29, rupee at 94 a dollar, suggests IMF data

May 04, 2022 / 06:11 AM IST

The multilateral agency's forecasts point towards a four-year delay to the Indian government's target of becoming a $5-trillion economy by FY25

India may only become a $5-trillion economy in FY29, according to the International Monetary Fund (IMF).

According to data from the IMF's World Economic Outlook Database, updated last month, India's nominal GDP is seen rising to $4.92 trillion in FY28. As such, it will only be in the following year, or FY29, that the GDP will cross the $5-trillion mark. That's four years beyond the target the Narendra Modi government had set.

The IMF's estimates for India don't go beyond FY28.

Finance ministry officials had earlier indicated that the government's target of raising India's GDP to $5 trillion by FY25 might get delayed by a year or two, with Chief Economic Adviser V Anantha Nageswaran saying as much following the presentation of the 2022 Budget.

"If we continue to retain the path of 8 percent of real GDP growth, it will translate into even 8 percent dollar GDP growth. If we extrapolate it, we should be a $5-trillion economy in terms of nominal GDP in the financial year 2025-26 or the financial year 2026-27," Nageswaran had said on February 1.

According to the IMF forecasts, India's nominal GDP in expected to grow 13.4 percent in FY23 in rupee terms. In US dollar terms, the nominal GDP growth in FY23 is forecast at 8.2 percent. The difference between the two nominal growth rates is down to the change in the exchange rate, with the rupee seen depreciating to 81.5 per dollar in FY23 from 77.7 per dollar in FY22.

In fact, the IMF's forecasts for India's nominal GDP in dollar and rupee terms are such that the rupee's exchange rate works out to be 94.4 per dollar in in FY28.

The IMF's forecasts assume a steady depreciation of the rupee against the greenback every year.

Nominal GDP Implied exchange rate Growth in real GDP (in rupees)
FY22 $3.04 trillion 236 trillion rupees 77.7 rupees per dollar 8.9%
FY23 $3.29 trillion 268 trillion rupees 81.5 rupees per dollar 8.2%
FY24 $3.58 trillion 302 trillion rupees 84.4 rupees per dollar 6.9%
FY25 $3.89 trillion 338 trillion rupees 87.0 rupees per dollar 7.0%
FY26 $4.23 trillion 378 trillion rupees 89.4 rupees per dollar 7.0%
FY27 $4.57 trillion 420 trillion rupees 91.8 rupees per dollar 6.5%
FY28 $4.92 trillion 464 trillion rupees 94.4 rupees per dollar 6.2%

While the IMF's immediate growth forecasts for India's real GDP are rather optimistic, those for the medium-term are perhaps lower than what the government and the Reserve Bank of India (RBI) will be hoping for.

Last month, the IMF cut its GDP growth forecast for India for the current financial year to 8.2 percent.  The estimate is rather optimistic as local projections are significantly lower. The RBI, for instance, has forecast that the GDP growth will fall to 7.2 percent in FY23 and further to 6.3 percent in FY24.

The IMF's numbers indicate India's real GDP growth will decline to 6.2 percent in FY28. Last week, the RBI's Report on Currency and Finance had said that a "feasible range for medium-term steady state GDP growth in India works out to 6.5-8.5 percent, consistent with the blueprint of reforms".

Siddharth Upasani
first published: May 3, 2022 03:51 pm
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