Datanomics: Rupee weakens, Indian economy slips to sixth-largest

India's GDP in domestic currency terms records a CAGR of 8.56 per cent between 2021 and 2025, reflecting highest economic growth among major economies

India has slipped to being the sixth-largest economy in 2025, falling behind the United Kingdom (UK) in dollar gross domestic product (GDP) terms. This comes even as the International Monetary Fund (IMF) on April 14 raised India’s real GDP growth forecast for FY27 to 6.5 per cent, while domestic estimates predict a real growth of 7.4 per cent in FY26. The divergence lies in nominal growth and currency effects. 

India’s 4th-largest economy dreams delayed

India’s GDP reached $3.92 trillion in 2025, slipping below the UK ($4 trillion). The Indian economy overtaking Japan’s as the fourth-largest, once expected in 2025, has been delayed. Projections now show India trailing in 2026. India is also projected to overtake Germany by 2031, a delay of two years compared to previous IMF projections. 

Domestic growth remains strong

India’s GDP in domestic currency terms recorded a compound annual growth rate of 8.56 per cent between 2021 and 2025, reflecting highest growth among key economies.  

Currency weakness underpins slip

The rupee depreciated 4.6 per cent against dollar in FY26, and is projected to see a bit higher depreciation in FY27. This has pulled down India’s GDP in dollar terms.