India, long regarded as one of the major engines of global growth in recent years, is starting to display signs of economic strain. With its currency hitting a record low and key indicators showing downturns, concerns are growing about whether the country can continue to maintain its strong momentum. As of today, the Indian rupee dropped to an unprecedented 84 to the US dollar, leading to further interventions by India’s central bank. This coincided with a more troubling report: the first contraction in industrial production since 2022. Add to that falling consumer prices, a dip in exports, and softer economic data overall, and the picture begins to look increasingly challenging for India.
India’s growth has been a source of optimism during a turbulent global economic environment. Over the past few years, the country has consistently managed to post high growth rates and extend its economic potential beyond its borders. Yet, this strong growth is now under pressure, as reflected by the rupee’s weakening position. This isn’t an isolated development but rather one that seems to be in line with a broader global economic slowdown. If India, the world’s fifth-largest economy, begins to falter, the repercussions will be felt globally.
India’s economy has shown resilience in the face of challenges, often being hailed as a rare success in the current economic climate. Amid slowing growth in major economies like China and the US, India has been a beacon of hope. The country’s stock market has been booming, foreign investments have been flooding in, and trade deals are continually being signed. However, the latest data reveals a stark contrast to this narrative. Exports, which had been one of the country’s strengths, have been contracting significantly. Meanwhile, the currency’s value has weakened considerably, a signal that India’s once-robust economic engine is starting to sputter.
While the rupee’s dip is a significant concern, it’s only one part of the puzzle. Other indicators are also flashing red. Consumer price rates have plummeted to their lowest levels since before the pandemic, and industrial production has taken a negative turn for the first time in two years. The drop in production, down 0.1% year-over-year, is particularly alarming given the country’s reliance on industrial growth to fuel its broader economy. Manufacturing, although still up by 1% compared to last year, has slowed dramatically, further compounding the country’s challenges.
India’s struggles come at a time when the global economy is facing a broader slowdown. In many ways, the country finds itself in a situation similar to China’s a decade ago. Just as China’s growth began to stall, India’s continued strength had provided a much-needed counterbalance in Asia. However, if India follows the same path, it could signal the start of a wider economic downturn that would affect markets far beyond its borders.
One of the key questions now is whether India can sustain its growth amidst these global headwinds. The country’s demographic advantage has often been cited as one of its strengths, with a large percentage of its population being relatively young. However, this youthful demographic also brings with it certain challenges. While India’s GDP has been growing, the country remains largely dependent on agriculture, with many people still working in subsistence farming. This places limits on how quickly India can transition into a more advanced, industrialised economy, especially given the current global economic climate.
The global backdrop has shifted significantly in recent years. When China began its transformation into an economic powerhouse, it did so in a world that was growing together. Global trade was flourishing, and economies were interconnected. India, however, is trying to replicate this transformation in a much less favourable environment. Trade has slowed, economies are de-globalising, and growth is becoming increasingly elusive. This makes India’s task all the more difficult.
Despite these challenges, India still has a lot going for it. The country’s stock market continues to perform well, and foreign investment remains strong. Aircraft manufacturers like Boeing are receiving record orders from Indian companies, and tech giants such as Apple are ramping up production in the country. These positive developments suggest that India’s long-term potential remains intact, even if its short-term outlook is more uncertain.
One of the biggest factors working in India’s favour is its youthful workforce. Around a quarter of the country’s population is under the age of 14, providing a strong foundation for future growth. Even though India is ageing like many other advanced economies, it still has a relatively young population compared to its neighbours. This gives the country a demographic advantage that could help it navigate the challenges ahead.
However, there are still major obstacles to overcome. India’s economic transformation depends on a favourable global environment, which is far from guaranteed. With the global economy facing a potential downturn, it remains to be seen whether India can continue to defy the odds and maintain its growth trajectory.
The rupee’s decline is a stark reminder of the risks that India faces. A weaker currency makes it more expensive for the country to import goods, which could further slow growth. At the same time, it also raises concerns about the country’s ability to continue attracting foreign investment. If investors begin to lose confidence in the Indian economy, it could lead to a further weakening of the currency and a deeper economic slowdown.
India’s central bank has already intervened to try to stabilise the currency, but whether these measures will be enough remains uncertain. The global economic environment is becoming increasingly difficult, and India is not immune to these challenges. While the country has managed to weather the storm so far, the signs of strain are becoming more apparent.
India finds itself at a critical juncture. The country’s recent success has been impressive, but it now faces a series of challenges that could undermine its growth. The weakening rupee, contracting exports, and slowing industrial production all point to a potential slowdown. Whether India can overcome these challenges will depend largely on the global economic environment and the country’s ability to continue attracting foreign investment.
