India's Emerging Market Ranking Dips to Sixth Position Amid Global Challenges
India experienced a significant setback in its emerging market standing during December 2025, slipping to the sixth position on Mint's comprehensive emerging market tracker. This decline occurred despite the country maintaining robust domestic economic indicators, highlighting how external global pressures can overshadow internal strengths.
External Factors Overwhelm Domestic Strengths
While India's real GDP growth remained impressive at 8.2% during the July-September quarter and manufacturing activity continued in expansionary territory, these positive domestic indicators proved insufficient to counterbalance the external drag. The composite score that determines rankings suffered primarily due to weaknesses across multiple external parameters that have been challenging India throughout 2025.
This marked India's poorest performance since February 2025, when similar external indicators emerged as vulnerable areas. Throughout the year, external headwinds consistently impacted India's ranking through their effect on exports, currency stability, and equity market performance.
Comparative Performance Among Emerging Economies
China emerged as the top-performing emerging market for December 2025, supported by relatively steady export growth, strong import cover, and currency stability compared to its peers. While China's manufacturing activity showed mixed results, gains in trade and financial indicators propelled it ahead of other nations.
China remains the only country besides India to secure the top rank more than once, having last topped the list in March 2025. Thailand and Malaysia secured the second and third positions respectively, benefiting from strong currency and stock market performances. Thailand gained additional strength from robust manufacturing activity, while Malaysia's decent GDP growth contributed to its ranking.
Key Pressure Points for India's Economy
The primary drag on India's performance came from equity market weakness, with stock market capitalization declining 1.8% month-on-month. This underperformance reflected a volatile year for Indian equities, as markets struggled to maintain momentum amid persistent foreign portfolio investor outflows and cautious global risk sentiment.
- Foreign portfolio investors remained net sellers through much of 2025, with total outflows occurring in eight of twelve months
- FPIs pulled out approximately ₹1.7 trillion from equities during 2025
- The rupee depreciated 1.4% month-on-month against the US dollar, placing it among weaker emerging market currencies
- The currency breached 90 per dollar in December, marking a 4.9% depreciation throughout 2025
Export performance, which had propelled India to the top ranking in November, failed to provide similar support in December. Merchandise export growth slowed sharply to 1.9% year-on-year from 19.4% in the previous month as favorable base effects faded, leaving India behind peers like Malaysia and China.
Mint's Emerging Markets Tracker Methodology
Launched in September 2019, Mint's Emerging Markets Tracker systematically compares nine major emerging economies using seven high-frequency indicators:
- Real GDP growth
- Manufacturing PMI
- Export growth
- Retail inflation
- Import cover
- Exchange rate movement
- Stock market performance
This comprehensive approach tracks shifts in economic momentum across countries, providing valuable insights into relative economic performance.
Near-Term Outlook and Critical Factors
The economic outlook for early 2026 presents a mixed picture, anchored by strong growth momentum but tempered by persistent external risks. First advance estimates project GDP growth of 7.4% in FY26, reaffirming India's position as the fastest-growing major economy globally.
Financial indicators have remained weak in early 2026, with FPIs selling ₹33,598 crore of equities until January 23, significantly higher than the ₹22,611 crore sold in December. This continuous foreign investor exodus has kept both the rupee and stock markets under considerable strain, with the rupee falling to a new record low of 91.9650 against the US dollar recently.
The upcoming Union Budget on February 1 will be closely watched for signals regarding capital spending, fiscal consolidation, and policy priorities that could influence economic trajectory. Additionally, February's GDP and CPI base-year revisions will reset key macroeconomic series, shaping how growth and inflation trends are assessed moving forward.
Recent data suggests gradual normalization in exports, with Barclays noting that India's trade performance is increasingly supported by diversification across destinations and products. This diversification has been helped by a series of free trade agreements that are beginning to broaden export bases beyond traditional markets.
However, the risk of renewed protectionism—particularly from the United States—could test this progress. Ultimately, export performance and revised macroeconomic data will prove critical in determining whether India can convert strong domestic fundamentals into sustained improvement in its standing among emerging markets.
