India may not become a $5 trillion economy until 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 expected to reach US$4.92 trillion in FY28, leaving GDP to reach US$5 trillion in the following year, it will break the dollar mark in FY29. This is four years ahead of the target set by the Narendra Modi government.
The IMF estimates for India do not go beyond FY28.
Treasury officials had previously hinted that the government’s goal of raising India’s GDP to $5 trillion by FY25 could be pushed back a year or two, Chief Economic Adviser V Anantha Nageswaran said after the budget was unveiled. by 2022.
“If we continue on the trajectory of 8% real GDP growth, that will actually translate to 8% GDP growth in dollar terms. Extrapolating from that, we should be a $5 trillion economy in terms of nominal GDP in the fiscal year 2025-26 or fiscal year 2026-27,” Nageswaran had said on February 1.
India’s nominal GDP is expected to grow by 13.4% in rupee terms in FY23, according to IMF forecasts. In US dollar terms, nominal GDP growth of 8.2% is forecast in FY23. The difference between the two nominal growth rates is due to the change in the exchange rate, with the rupee depreciating from 77.7 per dollar in FY23 to 81.5 per dollar in FY23.
In fact, the IMF forecast for India’s nominal GDP in dollars and rupees is for the rupee to trade at 94.4 per dollar in FY28.
IMF forecasts assume a constant annual depreciation of the rupee against the dollar.
While the IMF’s immediate growth forecasts for India’s real GDP are optimistic, they could turn out lower than expected by the government and the Reserve Bank of India (RBI) in the medium term.
Last month, the IMF lowered its GDP growth forecast for India for the current fiscal year to 8.2%. The estimate is quite optimistic as local forecasts are significantly lower. For example, RBI forecasts GDP growth to slow to 7.2% in FY23 and 6.3% in FY24.
IMF figures suggest that India’s real GDP growth will slow to 6.2% in FY2028. Last week, the RBI’s Money and Finance report said that a “possible range for GDP growth to medium term in India is between 6.5 percent and 8.5 percent, in line with the reform plan.”