By Suresh Unnithan
India’s dream of becoming a developed nation—Viksit Bharat by 2047—has rarely faced as many simultaneous headwinds as it does today. Headline GDP growth still flashes impressive numbers, but a rapidly depreciating rupee, record trade deficits, persistent doubts over the credibility of official statistics, and extreme inequality tell a far more sobering story.
The International Monetary Fund, in its 2025 Article IV consultation released in November, retained the ‘C’ grade for India’s national accounts data—the same mark it has given since 2019—citing an outdated 2011-12 base year, inadequate coverage of the informal sector, large unexplained statistical discrepancies, and the complete absence of seasonal adjustment. Several respected economists, including former members of the National Statistical Commission, now openly argue that the post-2015 GDP methodology systematically overstates growth by 2.5–4.3 percentage points every year by using formal-sector proxies for a shrinking informal economy. If these estimates are correct, India’s real GDP expansion in recent years has been closer to 3–4 percent rather than the official 7–8 percent.
Official data for the July–September quarter of FY2025-26 (Q2) nevertheless showed real GDP growing at 8.2 percent year-on-year, the fastest pace in six quarters, with Gross Value Added rising 8.1 percent. Nominal GDP expanded 8.7 percent, implying an extraordinarily low GDP deflator of just 0.5 percent—effectively near-zero inflation at the aggregate level. The IMF, however, projects only 6.6 percent growth for calendar 2025 and 6.2 percent for FY2026, signalling that the Q2 burst may be an outlier rather than a new trend.
The Indian rupee, meanwhile, has been in near-free fall. It closed at 90.17 against the US dollar on December 3, 2025, and hovered around the 90.00 mark as of December 7—the weakest level in history. The currency has depreciated 6.8 percent in 2025 alone, its worst annual performance since 2022. Over the past month it has weakened another 1.5 percent. Most analysts, including Goldman Sachs and HSBC, now expect it to test 90.50–91.00 by March 2026 unless the 50 percent punitive tariffs imposed by the United States in August 2025 are rolled back.
Sectoral indicators reveal deepening cracks beneath the headline growth. The HSBC Manufacturing Purchasing Managers’ Index fell from 59.2 in October to 56.6 in November 2025—its lowest reading in nine months and the sharpest monthly drop among major Asian economies. New export orders plunged to a 13-month low, directly attributable to the US tariffs that have already cut Indian shipments by 8.6 percent. For the first time in years, India has lost its title as the world’s fastest-growing major manufacturing economy to Thailand. The Services PMI fared slightly better at 59.8 in November, but hiring intentions softened and input cost inflation eased to a five-year low—hardly signs of vibrant demand.
Public debt stands at 81.9 percent of GDP (2024 figure), expected to ease marginally to around 80 percent by March 2026. External debt reached a fresh peak of $747.2 billion in the September 2025 quarter, though the external debt-to-GDP ratio improved slightly to 18.9 percent. Forex reserves have declined by roughly $25 billion since the tariff shock in August, limiting the Reserve Bank of India’s ability to defend the currency aggressively.
The trade picture has turned alarming. October 2025 recorded a merchandise trade deficit of $41.68 billion—the highest ever. Imports surged 16 percent year-on-year to $76.1 billion, led by gold imports tripling to $14.72 billion ahead of the festival and wedding season. Exports, in contrast, contracted 11.8 percent to $34.4 billion, with shipments to the United States falling 8.5 percent. The broader current account deficit is now widely expected to widen to 2.4–2.5 percent of GDP in the October–December quarter—its worst level in three years.
Domestic fiscal signals are equally worrying. Goods and Services Tax collections for November 2025 rose a mere 0.7 percent to ₹1.70 lakh crore, down sharply from ₹1.89 lakh crore in October. For the April–November period, total collections grew 8.9 percent to ₹14.75 lakh crore, but the domestic component actually declined 2.3 percent, pointing to extremely weak private consumption. Consumer price inflation collapsed to a multi-decade low of 0.25 percent in October, driven by food deflation of 5.02 percent—yet rural wages and urban discretionary spending remain stagnant.
Inequality remains among the world’s most extreme. The top 10 percent of Indians now own 77 percent of total wealth—an increase of 62 percentage points since 2000—while the richest 1 percent capture 57.7 percent of national income, the highest share on record. The bottom 50 percent of the population earns just 15 percent of total income and possesses average wealth of only ₹1.7 lakh, compared with ₹2,261 crore for the top 0.001 percent. India’s wealth Gini coefficient stands at 0.74, placing it near the very top of global inequality rankings.
Perhaps the starkest indicator of underlying fragility is welfare dependency: 80.56 crore citizens—over 57 percent of the entire population—still receive free or heavily subsidised foodgrains under the National Food Security Act, up by 1.66 crore in just the past month. Even after removing 2.49 crore duplicate and ineligible cards since 2020, the beneficiary list continues to expand, underscoring that hundreds of millions remain perilously close to the edge.
India is not in free fall, but the warning lights are flashing brighter than at any time since the pandemic. S&P Global estimates that sustained US tariffs could shave 0.5–1 percentage point off annual GDP growth. The RBI has already cut policy rates by 100 basis points in 2025 and inflation is projected to stay below 1.2 percent through March 2026, providing some cushion. Banking-sector non-performing assets are at multi-year lows, and capital adequacy remains comfortable.
Yet buffers are finite. Reserves are depleting, the rupee is under structural pressure, and private consumption—the traditional growth engine—shows little sign of revival. Achieving Viksit Bharat by 2047 will require far more than celebratory headlines. It demands urgent, honest reforms: a complete overhaul of the GDP methodology with a current base year and proper informal-sector surveys; aggressive export diversification away from an over-reliance on the United States; strongly progressive wealth and inheritance taxation to narrow extreme inequality; and accelerated labour-law and land reforms to create 12–15 million formal jobs every year.
India’s economy retains extraordinary underlying resilience—the 8.2 percent print for July–September proves that—but the gap between official narrative and ground reality has never been wider. If methodological overestimation, external shocks, and internal inequities are not confronted head-on, the vision of a developed India by 2047 risks giving way to a prolonged middle-income trap marked by division and disillusionment.
The path ahead is steeper than New Delhi admits, but history shows that when India chooses bold reform over complacency, it has repeatedly surprised the world. The choice, and the hour, is now.
