Our focus is on how Indigenous psychology is interpreted (or misinterpreted) and its implications for the quest for human liberation. Instead of stimulating emancipatory values and social change, there are differences in the interpretation and critical understanding of Indigenous psychology. In India, the Indigenous psychology movement has an anti-colonial stance, and the need is to develop a voice for neglected and oppressed Indigenous groups. In this chapter, we seek to problematize Indigenous psychology’s current understanding and practices and offer an alternative perspective for its theorization and application in the Indian context. Building on previous literature, three arguments have been developed. First, after critically examining the emergence and development of Indigenous psychology in India, it is argued that the promise with which it was started remains unfulfilled presently. Second, a critical look at the cultural politics of Indigeneity leads to an understanding that Indigenous psychology is a political project and should aim to ensure social justice, liberation, and re-humanization of the people. Third, we try to offer an outline of critical Indigenous psychology wherein an argument is provided that an essentialist and pure notion of Indigeneity will prove to be problematic and, therefore, such construction needs to be revisited and deconstructed.