BT Explainer: Why India’s economy slipped to the 6th rank according to IMF
BT Explainer: Why India’s economy slipped to the 6th rank according to IMF
A combination of two factors, a change in the base year of the GDP and a falling rupee, has delayed India’s aspirations to turn into a $5 trillion economy.
Surabhi
- Apr 17, 2026,
- Updated Apr 17, 2026 7:31 PM IST
The recently released World Economic Outlook 2026 of the International Monetary Fund has pegged India as the sixth-largest economy in the world in 2025 and 2026 in US dollar terms, slipping from the fifth-largest rank in 2024. The economy is expected to cross the $4 trillion mark in 2026 at $4.15 trillion with the UK economy overtaking it in size in terms of US dollars. The Indian economy is now slated to become the fifth largest economy in 2027 at $ 4.57 trillion and could cross the $5 trillion mark, becoming the fourth largest economy ahead of Japan and UK. By 2031, the IMF has estimated that India could be the third largest economy in the world with a nominal GDP size in US dollar terms of $6.79 trillion.
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Why has the IMF changed the ranking?
India remains the fastest-growing major economy in the world with an estimated growth of 7.6% in FY26 and is expected to expand by 6.9% in FY27, as per the RBI, and by 6.5%, according to the IMF. But a combination of two factors—the fast-depreciating currency and the new base year—has changed the size of the nominal GDP, which has impacted its global ranking.
As per the latest IMF data, the rupee has depreciated to 88.48 against the US dollar last year from about 84.6 in 2024. It is likely to weaken further to 92.59 this year, it has projected. Meanwhile, the British pound has appreciated against the US dollar, helping boost the UK economy size. Significantly, the IMF in October 2025 had already flagged that slower-than-expected nominal growth and a sharper-than-projected rupee depreciation would delay India’s goals to turn into a $5 trillion economy by one year. The IMF’s 2025 estimates had forecast that India’s GDP at $4.96 trillion in FY28 with rupee depreciation leading to the slower than estimated growth.
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How has the change in the base year impacted the size of the economy?
The new series GDP with a base year of 2022-23 nominal GDP or GDP at current prices is estimated at Rs 345.47 trillion in FY26 from Rs 318.07 trillion in FY27. Compared to the old series, the size of the economy in nominal terms in the new series came down. In FY25, nominal GDP in the new series was 3.8% lower than that in the old series. In FY24, it was Rs 289.83 trillion in the new series, lower by 3.8% than Rs 301.2 trillion in the old series and in FY25, nominal GDP in the new series at Rs 261.17 trillion was 2.9% lower than that in the old series.
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Chief Economic Adviser V Anantha Nageswaran had noted at the time of the release of the new series that the economy would cross the $4-trillion GDP mark in FY27 based on current projections. While India is on course to becoming the top three or four economies in the world, the timeline and ranking would depend on the exchange rate as well as the growth rates of other countries, he had said at the time.
Is the fall in the global ranking for the Indian economy a matter of concern?
Not really, say economists, noting that the fall in the size of the nominal economy in US dollar terms should not be seen as a matter of concern as the fundaments of the Indian economy are strong. They, however, highlight that the depreciation in the Indian currency has been very sharp and could pose challenges in the long term. Reserve Bank of India Governor Sanjay Malhotra also noted that the Indian rupee in 2025-26 depreciated more than the average in the previous years. Taking into account the volatility of the US dollar and fluctuations in global capital flows, the baseline assumption for the exchange rate has been revised to Rs 94 per US dollar as against Rs 88 in the October 2025 MPR, said the Monetary Policy Report 2026.
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The rupee has been falling over the last one year as the US implemented reciprocal tariffs and then the West Asia war created fresh geopolitical conflicts that muted investor sentiments.
Can the rankings change again?
Yes, the rankings can change again based on how other economies perform and more importantly, the rupee and US dollar exchange rate. The IMF typically uses the average annual market exchange rate for this purpose. If the depreciation of the rupee continues at a fast pace, then the nominal GDP in US dollar terms will reduce further. Further, if currencies of other economies such as the UK appreciate more against the US dollar, it would also make the UK economy stronger.
The recently released World Economic Outlook 2026 of the International Monetary Fund has pegged India as the sixth-largest economy in the world in 2025 and 2026 in US dollar terms, slipping from the fifth-largest rank in 2024. The economy is expected to cross the $4 trillion mark in 2026 at $4.15 trillion with the UK economy overtaking it in size in terms of US dollars. The Indian economy is now slated to become the fifth largest economy in 2027 at $ 4.57 trillion and could cross the $5 trillion mark, becoming the fourth largest economy ahead of Japan and UK. By 2031, the IMF has estimated that India could be the third largest economy in the world with a nominal GDP size in US dollar terms of $6.79 trillion.
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Why has the IMF changed the ranking?
India remains the fastest-growing major economy in the world with an estimated growth of 7.6% in FY26 and is expected to expand by 6.9% in FY27, as per the RBI, and by 6.5%, according to the IMF. But a combination of two factors—the fast-depreciating currency and the new base year—has changed the size of the nominal GDP, which has impacted its global ranking.
As per the latest IMF data, the rupee has depreciated to 88.48 against the US dollar last year from about 84.6 in 2024. It is likely to weaken further to 92.59 this year, it has projected. Meanwhile, the British pound has appreciated against the US dollar, helping boost the UK economy size. Significantly, the IMF in October 2025 had already flagged that slower-than-expected nominal growth and a sharper-than-projected rupee depreciation would delay India’s goals to turn into a $5 trillion economy by one year. The IMF’s 2025 estimates had forecast that India’s GDP at $4.96 trillion in FY28 with rupee depreciation leading to the slower than estimated growth.
Advertisement
How has the change in the base year impacted the size of the economy?
The new series GDP with a base year of 2022-23 nominal GDP or GDP at current prices is estimated at Rs 345.47 trillion in FY26 from Rs 318.07 trillion in FY27. Compared to the old series, the size of the economy in nominal terms in the new series came down. In FY25, nominal GDP in the new series was 3.8% lower than that in the old series. In FY24, it was Rs 289.83 trillion in the new series, lower by 3.8% than Rs 301.2 trillion in the old series and in FY25, nominal GDP in the new series at Rs 261.17 trillion was 2.9% lower than that in the old series.
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Chief Economic Adviser V Anantha Nageswaran had noted at the time of the release of the new series that the economy would cross the $4-trillion GDP mark in FY27 based on current projections. While India is on course to becoming the top three or four economies in the world, the timeline and ranking would depend on the exchange rate as well as the growth rates of other countries, he had said at the time.
Is the fall in the global ranking for the Indian economy a matter of concern?
Not really, say economists, noting that the fall in the size of the nominal economy in US dollar terms should not be seen as a matter of concern as the fundaments of the Indian economy are strong. They, however, highlight that the depreciation in the Indian currency has been very sharp and could pose challenges in the long term. Reserve Bank of India Governor Sanjay Malhotra also noted that the Indian rupee in 2025-26 depreciated more than the average in the previous years. Taking into account the volatility of the US dollar and fluctuations in global capital flows, the baseline assumption for the exchange rate has been revised to Rs 94 per US dollar as against Rs 88 in the October 2025 MPR, said the Monetary Policy Report 2026.
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The rupee has been falling over the last one year as the US implemented reciprocal tariffs and then the West Asia war created fresh geopolitical conflicts that muted investor sentiments.
Can the rankings change again?
Yes, the rankings can change again based on how other economies perform and more importantly, the rupee and US dollar exchange rate. The IMF typically uses the average annual market exchange rate for this purpose. If the depreciation of the rupee continues at a fast pace, then the nominal GDP in US dollar terms will reduce further. Further, if currencies of other economies such as the UK appreciate more against the US dollar, it would also make the UK economy stronger.
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