The finding by the Naandi Foundation, a non-profit group involved in eradicating poverty, was based on a study of the height and weight of more than 100,000 children in six Indian states.
The study found that as many as 42 percent of children under the age of 5 were severely or moderately underweight. Among those children, more than half showed severe stunting, or being much shorter than the median height for children in their age group.
"Despite India's remarkable economic growth over the last decade, many children still struggle to meet their most basic needs, including access to sufficient food and healthcare," the study said.
The study, however, said the prevalence of children underweight had decreased from 53 percent in 2004 to 42 percent in 2011, a 20.3 decrease over the seven-year period.
"The prevalence of malnutrition is significantly higher among children from low income families …," the report said.
Indian Prime Minister Manmohan Singh, who released the study, noted the 20 percent decrease in malnourishment in the past seven years, but added he was more concerned about the high percentage of children being underweight.
"In the years to come, these children will join our workforce as scientists, farmers, teachers, data operators, artisans and service providers. We cannot hope for a healthy future for our country with a large number of malnourished children," he said, the Economic Times reported.