Sonal Varma

India may see a goldilocks 2026 with strong growth and low inflation, but sustaining this balance will hinge on reforms, RBI policy support, fiscal consolidation and easing external pressures

The inflation backdrop provides ample room. Core inflation has edged up, but mainly driven by gold prices

They present near-term growth challenges, but India needs to play the long game

It provides policymakers with much-needed room to counter any global shocks

The answer lies in assessing the impact through both a cyclical and strategic lens

In a world where Trump 2.0 is negative for most countries, the mixed impact of Mr Trump's tariff web could still make India a relative winner

In 2025, macro policies will need to support domestic demand, but without compromising on macrofinancial stability risks

Early reports suggest softer consumer demand at the beginning of the festive season, with discounts and incentives offered by automakers and online platforms to boost sales and clear inventory

The balance of risk around growth and inflation is shifting. Inflation risks are overstated, while emerging growth signals appear soft

The RBI's monetary policy should be driven by domestic factors and not the Fed

It is placed well, both economically and geopolitically, to benefit from the China plus one strategy

India, when compared to the US, has been rather boring, albeit in a good way. In contrast to the volatility in the US markets and macro data, India has been a beacon of stability

Momentum may not sustain into next year; policymakers should stay vigilant and build buffers

Policy agility, prudence, and resilience will be key for sustained growth in a rapidly changing global landscape

The Budget should focus on keeping the domestic house in order. If it manages to do so, then India could attract large capital inflows once the global shocks fade

External storms are morphing into hurricanes. India is in a relatively better position than many other countries, but this period of heightened volatility will require agility and clarity on policy

External shocks and stagflation risks require optimal policy responses

The RBI officials stated the MPC believes that inflation is 'not persistent' and that there is 'no thinking' about policy normalisation

The path ahead also remains uncertain because it is closely tied to the path of the pandemic curve

Cyclical responses won't fix the structural constraints, and structural reforms don't address a cyclical slowdown