NEW DELHI, Jan 23 – A year after bouncing back from a pandemic-induced recession, India’s economy is showing signs of strain, with slowing growth, a slumping stock market, and a weakening rupee casting doubt on the nation’s drive to become a developed economy.
Once touted as the world’s fastest-growing major economy, India had captured global attention after overtaking China as the most populous country and displacing Britain as the fifth-largest economy in 2022. However, its momentum has stalled, revealing vulnerabilities even as it climbs the global rankings
India’s annual economic growth slowed to 5.4% over the summer, compared to 8.2% in the previous fiscal year. Revised projections peg growth for the current fiscal year at 6.4%, down from earlier optimistic forecasts. “India’s economy didn’t fully recover from the Covid dip until last year, later than most other countries,” said a leading economist.
The stock market, which had surged post-pandemic, has wiped out gains from the past six months. Meanwhile, the rupee has depreciated significantly against the dollar, diminishing the global value of domestic earnings and raising concerns about inflationary pressures.
Foreign investors, who once flocked to India as a growth hotspot, are pulling back. “Foreign investment has taken the call that the Indian stock market is overvalued,” said economist Pronab Sen. “Investors are redirecting funds to markets like Wall Street, where returns appear more stable.” India’s burgeoning middle class, whose wealth grew rapidly post-pandemic, is beginning to feel the pinch. Rising inflation, coupled with a slowdown in economic activity, has dampened consumer confidence.
For Prime Minister Narendra Modi, who has positioned India as a rising economic powerhouse, the slowdown poses both political and economic challenges. His government must recalibrate policies to sustain growth and attract foreign investment while addressing domestic economic concerns. Despite the challenges, India is still expected to surpass Germany as the world’s fourth-largest economy next year. However, analysts caution that climbing the ranks alone will not suffice without robust and sustainable growth to uplift the broader population.
