India’s $5 Trillion economy target: What’s causing the delays?

India’s dream of becoming a $5 trillion economy has been an important policy goal. The International Monetary Fund (IMF) has now suggested that this target is still achievable, but the timeline may be slightly longer than expected. The overall economic momentum remains strong, but certain global and domestic factors are slowing the pace in nominal dollar terms.

IMF’s Latest Projection

According to the IMF’s recent assessment, India may cross $4 trillion in FY26. By FY28, India’s GDP could reach around $4.96 trillion just short of the $5 trillion goal. This is a slight downward revision from earlier estimates, which had placed India above $5 trillion by FY28. The difference is not due to weak growth but mainly due to currency movements and inflation trends.

Real GDP Growth Still Strong

The IMF continues to see solid real economic growth in India. It projects 6.6% growth in FY26 and 6.2% in FY27. This shows that India’s domestic economy is expanding well through consumption, investment, and services. In real terms, India remains one of the fastest-growing major economies in the world.

Why Nominal GDP Is Lagging

The $5-trillion target is not based on real growth, but on nominal GDP in US dollars. This depends on inflation and the exchange rate. Currently, inflation is falling and the rupee has weakened slightly, which slows the growth of nominal GDP. Even with healthy real growth, these two factors reduce the final number when converted into dollars.

Lower Inflation, Slower Nominal Growth

Inflation is expected to fall to around 2.8% in FY26. This is good news for consumers, but it also means nominal GDP grows more slowly. Lower inflation reduces the size of the economy when measured in rupee terms and therefore also in dollar terms.

Impact of a Weaker Rupee

The IMF assumes that the rupee may stay weaker for some time. For example, it estimates the exchange rate to be around ₹87 per US dollar in FY26, and slightly weaker in FY27. When the rupee depreciates, the same output appears smaller in dollar terms, making it more difficult to reach the $5-trillion target on time.

External and Trade Challenges

Global economic conditions are also affecting India’s progress. Higher tariffs on exports, uncertain global demand, and trade fragmentation reduce export earnings and business confidence. The IMF notes that these headwinds may limit India’s export potential in the short term.

Structural Issues at Home

Some long-standing domestic constraints continue to affect productivity. These include labour-market rigidities, land-access difficulties, and slower insolvency resolution. Private investment remains uneven, while public investment has been carrying much of the burden. However, with government debt already high, there is limited fiscal space for strong stimulus.

Outlook: Caution, Not Negativity

The IMF does not present a pessimistic view. It acknowledges that India is still growing faster than most major economies. Inflation is under control, the financial system is stable, and foreign-exchange reserves are strong. The IMF simply notes that nominal dollar-based targets depend on many moving parts, not only real growth.

India’s economic fundamentals remain strong, and the $5-trillion goal is realistic. However, the journey may take slightly longer due to global pressures, currency trends, and structural bottlenecks. The overall message is not negative but careful and realistic. With stability, reform, and investment, India can still reach the milestone, even if the timing shifts slightly ahead.