The latest projections by the International Monetary Fund (IMF) offer a sobering snapshot of India’s economic trajectory. As per IMF estimates, Bangladesh may once again edge past India in per capita income in 2026. Bangladesh’s per capita GDP is projected at $2,911, higher than India’s $2,812. Per capita income remains a critical indicator of the lived economic reality of a country. That Bangladesh, a smaller economy, could achieve a higher per capita income than India underscores the fact that high GDP growth is not enough; the benefits of the growth must consistently reach all demographic groups. This is not the first time Bangladesh has outperformed India on per capita income. Between 2018 and 2025, Bangladesh maintained a steady lead over India, driven by strong export performance, particularly in garments, and improvements in social sector performance. While India briefly regained the edge, the IMF’s projection of another reversal in 2026 suggests that the gap is not merely cyclical but reflects structural issues.
India’s economy, over a decade or so, has been plagued by a host of woes such as a depreciating currency, high unemployment, widening income inequality and an ever rising cost of living. Adding to these, two shocks received by the economy over the last one year have worsened the situation. One is the tariff shock that US President Donald Trump’s administration slapped on India and the other is crude oil prices moving past US$100 per barrel over the past two months in the wake of the crisis in West Asia. Together, these shocks struck at both ends of India’s external sector. While the steep tariffs, at 50 per cent, weakened the country’s export momentum, the oil price surge sharply inflated the import bill. For an economy structurally reliant on energy imports, the latter presents a far more complex challenge. Unlike export losses, which can sometimes be offset through market diversification or currency adjustments, import shocks of this nature transmit directly into domestic inflation, fiscal stress, and current account imbalances.
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Events from the past year underscore the fact that India’s growth model, which has been based on consumer demand from its vast population, is not at all insulated from external shocks. High consumption can sustain demand, but it cannot neutralise the macroeconomic impact of elevated input costs, disrupted supply chains, or volatile capital flows as seen in recent months.
A nearly 10 per cent depreciation of the rupee against the US dollar over the last one year, coupled with an exodus of foreign capital from India’s equity markets, has pushed India’s GDP below the $4 trillion mark.
The ongoing tensions in West Asia highlight the fragility of global supply chains. The near disruption of tanker movements through the Strait of Hormuz has already driven crude oil prices to multi-year highs. For an energy-import-dependent economy like India, this translates into immediate inflationary pressures and a widening current account deficit. The Reserve Bank of India, in its latest bulletin, has flagged the risk of such supply shocks morphing into demand shocks if the war in the Middle East persists for some more time.
Compounding these external risks is the looming threat of El Niño, which could disrupt the southwest monsoon considered the lifeline for India’s agrarian economy. A weak monsoon not only affects agricultural output but also triggers food inflation, rural distress, and a slowdown in consumption demand. In a country where a significant portion of the population remains dependent on agriculture, such climatic uncertainties can have outsized macroeconomic consequences.
Facing economic challenges of such proportions are not unique to India. Other countries have and are facing them successfully because, instead of only brave talk, they usually carry a lot of substance. We in India are unfortunate to see only chest thumping but backed by absolutely no comprehension of economics or how foreign relations are no joke.
