India’s Economy Slips to 6th: Did Rupee Fall Cause It?

International Monetary Fund (IMF) forecast of India becoming the world’s fourth largest economy by end of 2025-26 went for a toss with the country slipping to the sixth position on the largest economies rankings, as the United Kingdom reclaimed its position as the fifth largest economy.

In April 2025, the IMF predicted India would overtake Japan to become the world’s fourth largest economy by the end of 2025-26. It estimated that India’s economy would grow to $4,187.017 billion by the end of FY 2025-26, overtaking Japan estimated to be at $4,186.431 billion. The IMF’s World Economic Outlook (April 2026) views India sitting at the sixth spot this financial year too even when India has registered growth better than expected in FY26.

Now, as per the April 2026 estimates, India’s economy had a nominal GDP of $3,916 billion at the end of 2025-26 and the UK has overtaken India with $4,003 billion GDP. Meanwhile, Japan’s GDP remains steady at $4,435 billion. This shows India’s GDP estimates have seen a drop over one year, UK’s nominal GDP has gone beyond the expectation.

What led to the sudden slipping of India’s position?

First, the IMF’s data on the size of a country’s nominal GDP is in dollar terms. With global rankings based on dollar-denominated GDP, they are sensitive to exchange rate movements. So, the Indian rupee’s depreciation has crashed India’s hopes of becoming the fourth largest economy. In the last year, the Indian currency has depreciated more than expected, from 84.57 versus the US dollar in 2024 to 88.48 in 2025, IMF said. This year, the IMF estimates see it at 92.59.

The Indian rupee has been on the decline due to capital outflows, uncertainty of India-US trade deal till February, and the West Asia conflict, leading to a rise in the crude oil prices and India’s import bill.

The second factor that had a bearing on the global economy rankings is India’s adoption of a new base year for its latest GDP series. The new data used by IMF makes use of a more refined methodology and according to it, the size of India’s nominal GDP in rupee terms has gone down. The base year consideration would also bring a significant change in numbers. Now, why has the base year changed. Due to GST changes and Covid disruption, the base effects made 2022-23 the most stable reference year.

If the older base year of 2011-12 was taken into consideration, India’s GDP at the end of 2025-26 would have been Rs 35,713,886 crore but with 2022-23 taken as the reference, it is estimated to be Rs 34,547,157 crore.

Economic experts said the decline of Rupee value and the shift to new GDP base year, lowered reported nominal levels. However, they are confident that the country’s growth is intact and fundamentally strong.

India continues to be the world’s fastest growing economy. It would be interesting to know that while India will be the sixth largest economy in FY27, in the next financial year, it is likely to surpass both the UK and Japan to secure the fourth position.