Weak rupee pushes India’s $5-trillion economy milestone to 2029 despite faster growth: IMF data

The IMF has lowered its estimate of India’s nominal GDP in 2028 to $4.996 trillion from $5.1 trillion projected six months earlier, despite raising its projections for the country’s economic output in rupee terms. The divergence reflects the growing impact of currency depreciation on India’s dollar-denominated GDP, which determines the country’s position in global economic rankings. The IMF’s October projections place India’s economy at $4.06 trillion in 2026, rising to $4.52 trillion in 2027 and $5.54 trillion in 2029.

Rupee depreciation offsets stronger domestic growth The latest projections suggest that the delay in reaching the $5-trillion milestone is driven more by changes in exchange-rate assumptions than by a deterioration in India’s nominal economic growth. The IMF now projects the rupee at an average of 95.5 per dollar in 2028 compared with 93.3 in its April projections. For 2027, the exchange-rate assumption has weakened to 95 from 93.

India’s rupee has weakened more than 5 percent since the start of the year. The rupee closed at 96.73 on Friday, before the RBI took measures to curb further depreciation. Meanwhile, India’s nominal GDP in domestic currency is projected to reach Rs 477.1 lakh crore in 2028, up from Rs 471.9 lakh crore estimated in April, an upward revision of 1.1 percent. Yet, when converted into dollars, the same year’s economic output has been revised downwards by around $63 billion.

A Moneycontrol calculation shows that at the April exchange-rate assumption of 93.3, the IMF’s latest projection for India’s 2028 rupee-denominated GDP would translate into approximately $5.11 trillion, comfortably above the $5-trillion threshold. However, at the revised exchange-rate assumption, that figure falls to around $4.996 trillion. This suggests that a weaker rupee more than offsets the upward revision in domestic nominal output, highlighting the importance of exchange-rate movements in determining when India reaches major dollar-denominated economic milestones.

India set to overtake Japan and UK in 2027 Despite the delay, India is projected to climb to fourth place in the global economic rankings in 2027, behind the US, China and Germany. According to the IMF’s October projections, India’s GDP will reach $4.52 trillion in 2027, marginally ahead of the United Kingdom’s $4.49 trillion and Japan’s projected $4.47 trillion. The shift would mark a significant change in global economic rankings, although the relatively narrow gap between the three economies means exchange-rate fluctuations could still alter the eventual outcome.

India’s economy is expected to expand further to $6.13 trillion in 2030 and $6.74 trillion in 2031, when it overtakes Germany to become the third-largest economy, according to the latest IMF projections. Higher growth forecasts, lower dollar GDP The downward revision in India’s dollar-denominated economic size comes even as the IMF has become more optimistic about its growth prospects. In its October World Economic Outlook, the IMF raised India’s real GDP growth forecast for FY27 to 7 percent from 6.4 percent earlier, citing resilient domestic demand and stronger economic momentum.

The IMF’s latest projections also show India’s nominal GDP growth in domestic currency accelerating to 11.7 percent in 2027 from 10.8 percent projected in April.