It is an era of ‘polycrisis’. Geopolitical tensions across regions, volatile commodity and financial markets, and supply chain disruptions are all challenging those involved in economic management. Countries are resorting to rationing of essential commodities or food. Risks to the global growth are deepening with rates falling to 3.2% in 2026 from 3.4% in the year-ago period, according to S&P, a global credit ratings agency.
Despite all the troubles, India’s economy is likely to show resilience. India’s growth for the year ahead was estimated at just over 7%, which could fall to 6.8% in an alternate scenario, the agency said. The International Monetary Fund, a global lending institution, raised its growth outlook for India and lowered it for the US and other countries.
Economic growth is one aspect. A key factor affecting your money is inflation. Faster economic growth is of no use if the economy's inflation rate is also high. It erodes all the gains on your investment.
The Reserve Bank of India governor, Sanjay Malhotra, made a speech at an event last week. He argued that India’s resilience is not an accident. It is by design and built on a philosophy that price stability is the precursor to economic growth.
RBI prioritises anchoring of inflation expectations through a flexible inflation targeting (FIT) framework. While the desired inflation rate for sustained economic growth is 4%, the RBI has the flexibility to adjust it by up to 2 percentage points above or below that mark. That system was adopted in 2016 when Raghuram Rajan was the RBI governor. That has worked through crises like COVID and global supply chain disruptions.
India’s average headline inflation has dropped to 4.7% (September 2016 to December 2025), down from 7.4% in the years prior (April 2012 to August 2016), RBI governor Malhotra said.
While managing inflation, price stability was maintained through the robustness of the banking sector. The problem of bad loans that plagued India’s banking sector has declined significantly, and banks now have stronger balance sheets, enabling them to lend to individuals and businesses. RBI also made adequate interventions in the foreign exchange and gold markets to ensure that the volatility in the currency markets did not get out of hand.
The governor also explained that the RBI worked in tandem with the government, which is responsible for the fiscal policy. In India, inflation is influenced by supply-side factors. The government has taken strong steps by boosting infrastructure spending to build new roads, highways, and bridges, and by supporting the movement of goods. Adequate provisions were made over the years to boost agricultural infrastructure and output as food supply shocks influence inflation rates. Strengthening storage and supply chain infrastructure assumes significance.
The RBI governor explained that during the current crisis, the government took steps to boost domestic oil and gas production and diversify energy sources through investments, while maintaining fiscal responsibility.
The central government’s fiscal deficit-to-GDP ratio declined to 4.4% in 2025-26 from 9.2% in 2020-21. India’s general government debt-to-GDP ratio is reasonable, with the world’s top 10 economies (by nominal GDP in USD), excluding Germany and Russia, having higher debt ratios than India.
What does it mean to your money?
Inflation is the biggest enemy of your money. If you are keen to manage your wealth, you need to understand the factors that influence inflation. To ensure adequate wealth, those managing the economy have to do their jobs efficiently. The RBI governor Sanjay Malhotra’s speech is a good explanatory note. The speeches delivered by the RBI governor and deputy governors at various forums are published on the RBI website. It is not possible for you to track a voluminous amount of information that determines the future inflation rate. However, it is not so difficult to read or listen to these speeches to understand the state of the economy and inflation prospects.