I'm sure its to limit spammers. The same reason twitter limits the number of people you can follow and facebook limits the number of friends you can have.
Yes practically a one person cant have that much of friends. If you need more than that, the business pages are there.
The same reason why you can see facebook or twitter limiting your fans / followers. The basic idea here is that you can't have that many contacts, specially the ones you know well. If you have, then either you are a spammer or a very big company. And last I heard, it was for 'personal' use.
I think the number 5000 is more than enough try to form a loop and group with that circles , to make 5000 to 10000 , 20000 etc
Limitations are every where in the web i.e. just because to keep it fair and to reduce the spam. We can see the same limit in facebook that we can add only upto 5000 friends.