IMF Projected India $5 Trillion Economy Target to Hit in FY29

IMF Projected India $5 Trillion Economy Target to Hit in FY29

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Recently, the International Monetary Fund (IMF) revised India’s economic forecast, projecting the nation to achieve a $5 trillion economy in FY29, a year later than earlier estimates.

Highlights of International Monetary Fund (IMF)’s Revised Projection for India

• The IMF now estimates that India will reach a $5 trillion economy only in financial year 2028‑29 (FY29). This is a revision from earlier estimates that had expected the milestone by FY28.
• According to the revised projection, India is expected to cross the $4 trillion economy threshold in FY26. By FY28, the GDP in dollar terms is projected to reach about $4.96 trillion, falling slightly short of the $5 trillion goal. 
• In February 2025, the IMF had forecast India’s GDP at around $5.15 trillion for FY28. According to the latest outlook, the FY28 estimate is nearly $200 billion lower.
• Compared with the IMF’s 2023 outlook — which had placed FY28 GDP at roughly $5.96 trillion — the current estimate is about $0.5 trillion less.
• The IMF has also adjusted Nominal GDP growth estimates in rupee terms downward. For FY26, nominal growth is expected to be about 8.5 percent, lower than earlier estimates of around 11 percent. For FY27, the projection is 10.1 percent. Growth in dollar terms it is estimated to be even lower: about 5.5 percent in FY26, and 9.2 percent in FY27. 
• Despite the delay in reaching the $5 trillion mark, the IMF continues to regard India as one of the fastest‑growing large economies globally. Strong domestic demand, favourable structural aspects and ongoing reforms support this outlook.

Reasons Behind the Delay to FY29 for India’s $5 Trillion Target

• Exchange‑Rate Depreciation: The International Monetary Fund (IMF) now uses a weaker rupee assumption for coming years. For FY25 the baseline changed from ₹82.5 per US dollar to ₹84.6. For FY26 the assumption moves to ₹87 and for FY27 to ₹87.7. This weaker rupee reduces the dollar‑size of India’s economy and pushes back the $5 trillion milestone.

• Slower Nominal GDP: The IMF has trimmed its forecast for nominal GDP growth in rupee terms. Slower growth in nominal GDP means that the overall size of the economy in rupees grows less than assumed. That weakens the base on which dollar conversions happen  further delaying the target in dollar terms.

• Global Inflation: Higher relative inflation in India compared to advanced economies tends to weaken the rupee over time. Inflation erodes the real value of the rupee, and this inflation‑driven depreciation reduces the USD value of India’s output. This persistent inflation differential undermines India’s dollar‑GDP conversion.

• Rupee Volatility: The IMF has reclassified India’s exchange‑rate regime from “stabilised” to a “crawl‑like arrangement.” This reflects its view that the rupee is subject to gradual depreciation rather than being kept stable. That adds uncertainty to future dollar‑economy estimates and makes achieving a fixed dollar milestone more challenging.

India’s GDP Growth Trajectory

• India moved into a higher growth path after reforms in 2014. The economy expanded steadily from the mid-2010s. Growth slowed in 2019 and then fell sharply in 2020. The economy rebounded after 2021. The rebound came from renewed consumption and policy support. Real GDP grew strongly in FY2023-24. 
• The services sector remains the largest share of GDP. The industry sector gained from strong manufacturing output in 2023-24 and the agriculture sector kept a steady share but it grew slower than services. The shifting shares reflect structural change. 
• Manufacturing showed robust recovery in 2023-24 and output rose by nearly ten percent in that year. Mining and quarrying also recorded higher growth in 2023-24. These gains helped lift overall gross value added.
• Investment recovered but remained below desired levels for rapid job creation. Private investment rose slowly after 2021 and public capital expenditure stayed elevated to boost infrastructure. Higher public investment supported demand and long term capacity.
• Formal employment increased in manufacturing and services. Informal work continued to account for a large share of employment but skill shortfalls limited faster absorption of labour into productive jobs.

Government Policies and Initiatives to Achieve $5 Trillion Economy

• The government launched Make in India in 2014 to increase domestic production. The policy aims to raise the manufacturing share in GDP and create large scale jobs by focusing sectors including electronics, defence and automotive. The policy seeks higher foreign investment and better industrial capacity.
• The government introduced the Production Linked Incentive scheme in 2020. The scheme encourages firms to expand output in India. The incentives cover sectors like pharmaceuticals, solar modules and mobiles. The scheme supports higher capital investment and wider industrial value chains.
• The government launched the National Infrastructure Pipeline in 2019. The plan covers more than six thousand projects across sectors. The government created the Gati Shakti platform in 2021 to integrate data and speed up project approval. Better roads, ports and logistics corridors support faster movement of goods. 
• The government expanded digital and financial access through the Jan Dhan Yojana in 2014. The scheme targeted universal bank accounts. The UPI platform grew rapidly after 2016 and changed digital payments. The government promotes digital identity and direct benefit transfer to reduce leakages. 
• The government launched Startup India in 2016 to boost entrepreneurship. The policy supports early stage funding and easier compliance. The ecosystem grew with more recognised start-ups after 2017. This support helps build new jobs and new markets that contribute to long term income growth.
• The government launched the Skill India Mission in 2015. The programme aims to train workers and reduce skill gaps. The mission supports employability in manufacturing, services and technology.
• The government simplified business rules through ease of doing business reforms after 2016. Clearances for industry and trade became faster and customs processes shifted to digital systems to reduce delays. These changes help firms compete in global markets.
• The government increased welfare support through housing, sanitation and health missions. PMAY expanded access to housing after 2015. Ayushman Bharat launched in 2018 to provide health security. These programmes support human development and stable consumption patterns. Stable consumption strengthens the demand base for economic expansion.