Is India’s economy groaning under heavy debt burden? Is the falling rupee an indicator of a worrisome economic situation? Is there no improvement in the country’s unemployment situation? The answers are quite surprising.
Every once in a while, a single economic headline sends a tremor through public discourse. Over the past few days, that headline has been the Indian Rupee’s sudden slide toward—and, in some speculative corners, beyond—the psychologically daunting level of 100 against the U.S. Dollar, which has not happened as yet. But the very fact that people believe it will crash to triple digits tells us that confidence is wobbling.
The other headline that grabbed attention—a less glamorous but equally consequential one—came from Washington. The IMF’s Article IV report for 2025 assigned India a ‘C’ grade for the quality of its national accounts, the second-lowest rating on its A-to-D scale. Overnight, social media declared that India’s GDP figures were “fake,” that the growth story was over, and that “Viksit Bharat by 2047” was nothing more than a political fairy tale.
Both reactions—panic over the rupee, outrage over the grade—are emotionally understandable. But they miss the larger, complex reality. India’s economic narrative in late 2025 is not one of collapse or free fall. It is a story of strong domestic momentum mixed with external vulnerabilities, a story where data quality needs scrutiny, not cynicism, and where a currency slump is less an omen of doom than a reminder of how deeply India is now entangled in the volatile geopolitics of global trade.
Nevertheless, it does matter that the rupee has crossed the 90 mark. Because exchange rates are often as psychological as they are economic. Crossing 90 sends a signal—whether valid or not—that something is out of balance.
Why Is the Rupee Falling? A Reality Check
The rupee’s 4–5% depreciation this year stems mainly from external pressures rather than internal weakness. Aggressive U.S. tariffs, which have pushed effective rates on some Indian exports to nearly 38%, have hurt competitiveness. Foreign Portfolio Investors (FPIs) have withdrawn around $10 billion since mid-year, adding volatility. Meanwhile, a widening trade deficit driven by costlier imports and weak merchandise exports has increased external stress. With U.S. interest rates still high, global investors are fleeing to safer assets, putting further downward pressure on emerging-market currencies, including the rupee, which has become one of Asia’s weaker performers in 2025.
However, the Indian Rupee (INR) has shown mixed performance against major Asian currencies in early December 2025, with general depreciation trends against the Japanese Yen (JPY), South Korean Won (KRW), and Singapore Dollar (SGD), while fluctuating slightly against the Chinese Yuan (CNY). The chart illustrates the percentage change in exchange rates (INR per unit of foreign currency) from December 1, 2025, as the baseline. A positive percentage indicates INR depreciation (weaker INR), while negative shows appreciation (stronger INR).
Is This a Crisis? No. Not Even Close.
With around $695 billion in forex, India’s robust reserves offer extensive protection from external problems. As of December 2025, India’s outstanding World Bank debt (IBRD + IDA) is about USD 39.3 billion, based on data available up to October 2025, and no major updates have altered this figure since. This is only around 5% of India’s total external debt of roughly USD 747 billion (June 2025), a modest share for the Bank’s largest borrower and one mainly used for long-term infrastructure, social, and development projects. India’s external debt-to-GDP ratio stands at about 19%, well below the 30% level usually considered risky for emerging markets, and World Bank loans amount to less than 1% of India’s projected USD 4.19 trillion GDP in 2025. With more than ten months of import cover in forex reserves and a resilient financial system highlighted in the IMF’s November 2025 review, India’s debt profile remains stable. World Bank lending is also largely concessional, lowering repayment burdens. Overall, India’s borrowing aligns with its development goals and remains comfortably sustainable, though global shocks or slower growth would warrant routine monitoring.
External debt is manageable at around 19% of GDP, which is a stronger position than most emerging economies with tighter financing issues. Strong foreign investment continues, reaching almost $44 billion in the initial five months of FY25/26, reflecting investor trust in India’s future. These strengths demonstrate the rupee’s decline is a test, not an upcoming crisis. India’s situation is not unique or alarming, as many currencies are weakening against the dollar during global tightening, and countries like Japan, South Korea, and Indonesia face similar issues. However, ignoring the depreciation entirely would be unwise, as a weaker rupee raises the prices of essential imports like oil, fertilisers, electronics, and industrial inputs—items India can’t easily replace. A slight depreciation usually increases inflation by about 0.2–0.3% in the coming quarters. The real issue is if India can handle these increasing outside pressures with its internal strengths.
The alarmist statements on India’s total debt burden are also unfounded. Based on the latest 2025 projections from sources like the IMF and other economic databases, India's general government gross debt stands at approximately 81% of GDP. This places it in the moderate range—higher than some emerging markets like Russia (15%) or Saudi Arabia (30%) but significantly lower than advanced economies like Japan (255%), Italy (135%), the United States (122%), and France (111%).
The IMF’s ‘C’ Grade: A Reality Check, Not a Final Verdict
India’s national accounts statistics received a ‘C’ grade from the IMF, which caused strong political reactions; critics accused data manipulation, and supporters saw the report as Western bias. Both sides are missing the mark. The IMF’s evaluation cites methodological flaws, not fraud. It has three main concerns: poor measurement of India’s informal sector, which employs almost 90% of its workers; Crucially, this grade applies only to a specific segment of India’s statistical system, not the entire framework. India’s data rating is ‘B,’ suggesting data is mostly reliable for economic analysis and policy, despite room for improvement.
Does This Mean India’s Growth Is Overstated?
According to the IMF, India’s growth numbers may be overstated by about 0.5 to 1%, but even after trimming the excess, India still outruns every other major economy. In other words, the debate is more about optics than outcomes. And the private-sector data boosts optimism. The Purchasing Managers’ Index (PMI) has been sitting comfortably above 59, signalling factories that are very much alive. Record-high e-way bill generation—the digital permits required for moving goods across states—shows trucks and warehouses are active. Additionally, 21 million new jobs in the year to September, reflects the economy’s health. The IMF isn’t saying the growth is fake; it’s simply pointing out that India’s fast-expanding, partly informal economy needs better tools to measure what is actually happening.
India’s Domestic Engine: Strong, Synchronised, and Unusually Well-Balanced
The scope of India’s internal economic growth in 2025 is a key feature. GDP growth was 6.5% in FY2024/25, then accelerated to 7.8% in Q1 FY2025/26; the trend is still strong, despite data concerns. Personal spending increased by over 7%, while investment saw nearly 9% growth, and service exports stayed at a high level. Inflation also reached historic lows, with CPI at 0.25% in October, thanks to GST, harvests, and base effects. Even underlying inflation remained within the RBI’s comfort zone. Indian employment, usually a weak spot, has unexpectedly strengthened, creating about 21 million jobs in the last year in both cities and the countryside. The expansion has also been aided by banking conditions: the RBI’s 100-basis-point rate cuts since February led to increased credit growth, higher retail spending, renewed borrowing by small businesses, and controlled non-performing assets. Strong demand, low inflation, more jobs, and good credit make India different than most large economies. India’s domestic economy is a bright spot in 2025, outperforming China, Brazil, South Africa, the Eurozone, and the United States on multiple key domestic measures.
But certain problems should worry us.
The External Weaknesses: India’s Achilles’ Heel
India is susceptible to global shocks, and the rupee’s fall shows underlying issues. The trade deficit poses the biggest, ongoing problem. The Current Account Deficit, at 0.6% of GDP in FY24/25 and forecast to grow to 1% this year, masks underlying problems: struggling merchandise exports, high oil imports, and rising electronics imports, even with production incentives. If India doesn’t modernise its manufacturing, broaden its supply chains, and get better free trade deals, the rupee will stay susceptible to outside volatility. Another critical area of concern is how foreign portfolio investors act. FPIs see India as a volatile, high-return market, sensitive to global rates, tariffs, and politics. The irregular flow of money causes market instability in stocks and bonds, and this movement affects the currency, making the rupee more reactive to world finance.
A Balanced Scorecard for Late 2025
India’s economic reality is revealed by examining key indicators. Strong growth persists, potentially over 6.5% after revisions, with low inflation providing relief for consumers and the RBI. India is indeed creating more jobs, but too many of them are low-quality—informal, insecure, low-wage, or without benefits—while not enough stable, productive, well-paying jobs are being generated in manufacturing, modern services, and skilled sectors.
Fiscal policy is fairly controlled, and the deficit target is 4.4%. External balances seem steady but are vulnerable, with a rising deficit and rupee issues. Also, India’s large foreign exchange reserves protect against external shocks. The assessment is complicated by poor data quality, especially in the informal sector. In general, this depicts an economy that’s neither failing nor excelling, but a resilient system seeking equilibrium in a volatile world.
The Bigger Picture: What the Rupee and IMF Grade Reveal About India’s Path Ahead
India’s economic issues reveal a truth: it’s big enough to be watched but not strong enough for global instability. This moment is defined by four themes. India’s most pressing need is improved data; start with the census, household surveys, and tools for the informal sector. When data lacks credibility, investors pause, governments misuse funds, and the public’s faith weakens. Next, India has to diversify its trade, since its exports are too exposed to tariffs and geopolitical instability. India’s long-term success also depends on boosting productivity. India’s Total Factor Productivity has grown by around 1.4% yearly since 2000, and must significantly improve for India to achieve high-income status by 2047. India now requires closer alignment between financial and monetary policy. The nation can match fiscal tightening with monetary ease, thanks to low inflation and high growth.
Conclusion: A Moment of Sobriety, Not Panic
India faces a pivotal moment. The rupee’s decline to 90 isn’t a disaster, but a sign of weakness. The IMF’s ‘C’ grade doesn’t condemn, but it should cause us to reflect. The sensational headline about crossing 100 isn’t the real story of the Indian economy in 2025. The deeper story is about a strong internal economy, but vulnerable externally.
India’s rupee will become a small note if it improves statistical capacity, trade resilience, and productivity reforms in the present time. If it doesn’t, today’s worry may become tomorrow’s truth.
India’s economy is still robust, showing great potential, though it needs some adjustments.
IMF, GDP. WORLD BANK, Rupee, Yuan, Dollar, Yen, Ruble, WON, Singapore, South Korea, India, USA, Japan, Exchange Rate, Indian Economy, Growth Rate
