India nears $4 Trillion GDP, but $5 Trillion dream faces delay

Synopsis: India is set to cross the $4 trillion GDP mark by FY26 despite slower nominal growth and a weaker rupee, but long-term goals are slipping, with the $5 trillion target now likely only by FY29 and $7 trillion beyond 2030.

India’s march toward becoming a multi-trillion-dollar economy continues, but shifting economic conditions are reshaping the timeline. Slower nominal GDP growth, a weakening rupee, and softer inflation have tempered earlier optimism, prompting economists to revise their projections. Even so, India remains on track to hit the $4 trillion mark by FY26, though longer-term milestones may take a little more time to materialise.

GDP increases when there is an overall rise in the production of goods and services within a country. This usually happens during periods of economic expansion driven by factors such as increased consumer spending, higher business investments, improved industrial output, and favourable government policies. Additionally, growth is supported by strong demand in agriculture, manufacturing, and services sectors, along with stable inflation and improved global trade conditions.

Chief Economic Advisor V. Anantha Nageswaran said on Tuesday that India is on track to cross the $4 trillion GDP milestone in the current financial year, rising from about $3.9 trillion at the end of March 2025. He noted that achieving and sustaining high growth is crucial at a time when global geopolitics is in a “state of flux,” as economic strength directly enhances India’s strategic leverage and global positioning.

Speaking at the IVCA Green Returns Summit 2025, he stressed that India’s development path must align with climate priorities, including energy transition, environmental protection, and managing the risks of climate volatility. Acknowledging the nation’s vulnerability, especially in agriculture, coastal regions, and ecological systems Nageswaran reaffirmed India’s commitment to achieving net zero emissions by 2070.

Economists believe India can still reach the $4 trillion GDP mark by FY26, even though nominal growth has moderated and the rupee has weakened. With around 8% nominal GDP growth, the economy is projected to touch ₹357 trillion, closely matching the FY26 Budget estimate of ₹356.97 trillion. At an assumed exchange rate of ₹88 per USD, this would be enough for India to achieve the $4 trillion milestone.

However, growth momentum has softened. Nominal GDP expanded 8.8% in Q1, and forecasts suggest it may slow to about 8% for FY26, weighed down by lower inflation and currency depreciation. These factors extend the timeline for the government’s long-term economic milestones, as slower price growth and a weaker rupee reduce the pace at which GDP rises in dollar terms.

Because of these pressures, India’s ambitious targets are likely to be delayed. The $5 trillion GDP goal, earlier expected by FY27, is now more realistically achievable by FY29. Similarly, the earlier projection of reaching $7 trillion by 2030 appears challenging under current conditions, unless growth accelerates and the rupee stabilises.

Written by Manideep Appana

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