Background The alarming increase in the prevalence of obesity has implications for chronic kidney disease (CKD) progression in type 2 diabetes (T2D). This study aimed to assess if increased body mass index (BMI) can be an independent risk factor for CKD and T2D in the Indian context. Materials and Methods In this cross-sectional study, 602 (M:F = 378:224) participants were screened using Kidney Disease Improving Global Outcomes (KDIGO) from January to October 2023 in Chennai. Demographic, anthropometric, biochemical, clinical details, and comorbidities were recorded. T2D with CKD low risk was taken as control group, and CKD moderate and high risks were the study groups. BMI was classified based on the Asian criteria into normal (18.5–22.9), overweight (23–24.9), and obese (≥25 kg/m2). Results Majority of participants in moderate and high risk categories were obese compared to the low risk category (60.5% and 66.4% vs. 39.1%; p < 0.001). A higher proportion of participants was on antihypertensive drugs in the high risk group and in the obese category (p < 0.001). Comorbidities and diabetic complications were higher in the high risk group (p < 0.001). Multivariate logistic regression revealed that age of ≥ 60 years [OR(95% CI); 6.3(2.2–18); p = 0.009]; increased BMI as overweight [3.6(2.1–6.3); p < 0.001] and obese [5.2(3.3–8.3); p < 0.001]; smoking [4.2(1.7–10.2); p = 0.002]; increased duration of diabetes of 5–15 years [2.3(1.2–4.5); p = 0.013], 16–25 years [4.8(2.2–10.4); p < 0.001], and >25 years [4.2(1.4–13); p = 0.011]; systolic blood pressure [1.01(1.0–1.03); p = 0.02]; and hemoglobin A1c [1.2(1.1–1.3); p < 0.001] were independent risk factors for the progression of CKD. Conclusion Increased BMI was independently associated with CKD in T2D. Overweight and obese individuals are four to five times at risk for CKD progression. Early identification, lifestyle intervention, and weight-lowering drugs may reduce the complications of obesity in T2D and CKD.