The Indian Economic Survey 2025–26 marks a decisive phase in India’s long journey of monetary evolution. From the license-permit era of the 1970s to the post-liberalisation financial deepening after 1991, and from inflation-targeting adoption in 2016 to the digital acceleration post-UPI in 2019, India’s monetary system has continuously reinvented itself to match economic realities. The FY25–26 period represents yet another inflection point—where old rules of monetary prudence collide with new frontiers of algorithmic finance, global geopolitical fragmentation, and a credit-hungry, data-driven domestic economy.
Survey calls this moment a refinement of the regulatory touch—neither heavy-handed nor laissez-faire, but calibrated for an economy preparing to cross the USD 5 trillion threshold amid turbulent global tides.
Policy Signals in FY26: When Monetary Easing Meets Strategic Caution
The Survey documents the RBI’s subtle but significant shift toward supporting growth, reflected in a 100 bps reduction in the repo rate to 5.25% between April–December 2025, complemented by a 100 bps CRR cut, injecting nearly ₹2.5 lakh crore into the financial system. This was not a typical expansionary cycle—it was a targeted, data-driven move. Inflation was moderating, real sector demand was recovering, and the RBI’s stance moved to “neutral,” signalling preparedness for both upward and downward risks.
Broad money (M3) expanded by 12.1%, lending rates eased (WALR on fresh loans fell to 8.71%), and surplus liquidity averaged ₹1.89 lakh crore, supported by open market operations. These developments show a system balancing growth support while avoiding overstimulation—a delicate equilibrium that emerging markets rarely achieve in periods of global volatility.
A Banking System at Multi-Decadal Strength—But Not Without Cracks
India’s scheduled commercial banks continue to post multi-decadal improvements. As Survey highlights, the GNPA ratio fell to 2.2%, NNPA to 0.5%, and CRAR stood at an impressive 17.2% by September 2025. Profit after tax rose 16.9%, showcasing a resilient sector that has rebuilt itself after the stress cycles of 2013–2018.
Credit growth, though momentarily moderated, surged again to 14.5% YoY by December 2025. The composition is telling of a changing consumption-production structure:
- MSME credit: +21.8%
- Micro/small firms: +24.6%
- Personal loans: +12.8%
- Corporate sector: selectively borrowing amid cost-optimization cycles
Higher recovery rates under IBC and SARFAESI—26.2% in FY25, nearly double earlier levels—indicate a maturing insolvency framework.
Yet, Survey warns of creeping risks: rapid personal credit expansion, concentration in digital lending platforms, and potential mispricing of risk in an era of algorithmic credit scoring.
Global Fragility: The New Constraint on India’s Monetary Ambitions
FY25 brought a surge in uncertainty due to US tariff impulses, supply chain re-routing, and capital flow unpredictability. Global investors shifted toward gold, triggered by perceived geopolitical fragility and elevated bond yields.
The Survey’s firm-level study (811 listed companies, 2010–2024) is particularly striking:
- Every major uncertainty shock reduced capex by 0.51% of net fixed assets.
- Export-heavy and mid-tech manufacturing firms suffered the sharpest pullbacks.
- Services—especially IT and finance—remained comparatively resilient.
In essence, global turbulence is now transmitted instantly through expectations, financial markets, and AI-driven investment models. For India, which depends increasingly on private capex for its next growth cycle, this is a structural challenge.
AI, Stablecoins, and Digital Risks: The New Frontier of Monetary Regulation
Survey is unusually candid about emerging risks.
AI-driven models, widely adopted by NBFCs, fintechs, and banks, may create:
- Herding behaviour (similar models reacting identically)
- Volatility amplification due to algorithmic triggers
- Social media sensitivity, where viral misinformation can catalyse bank runs
Meanwhile, global stablecoins reached a market cap of USD 305.4 billion, challenging traditional capital flow controls and prompting the need for new regulatory architectures. India, preparing for digital rupee expansion and cross-border CBDC pilots, must now craft rules that protect stability without stifling innovation.
Financial Inclusion and the Digital Infrastructure Revolution
The Survey reiterates that India’s greatest strength is its digital backbone—UPI, Aadhaar-enabled services, account aggregators, and the growing digital public infrastructure ecosystem. Financial inclusion is no longer about opening accounts; it is about integrating every citizen into a real-time, low-cost, technology-driven financial ecosystem.
But future challenges loom: scaling infrastructure as GDP accelerates, ensuring privacy and cyber-resilience, and preventing algorithmic discrimination in credit access.
The Futuristic Outlook: A Monetary System Preparing for a New Economic Geography
In the next decade, India’s monetary and regulatory architecture will be shaped by:
- AI-augmented monetary policymaking, where real-time data flows replace lagged indicators.
- Tokenised assets and programmable money, altering liquidity transmission.
- Geopolitical fragmentation, where trade blocs—not global markets—drive capital flows.
- A credit system led by MSMEs and households, reshaping banking portfolios.
- The rise of behavioural finance and trust economics, as financial inclusion deepens.
India’s trajectory will depend on whether it can master these transitions without compromising stability—becoming a case study in monetary innovation for the Global South.
Critical Takeaway: Refining the Regulatory Touch Is Not Optional—It Is Inevitable
Survey does not merely document the year’s performance; it frames India’s regulatory future. The line between innovation and instability is becoming thinner, and the RBI’s challenge is no longer just inflation control—it is systemic resilience in a world shaped by AI, geopolitics, and digital money.
India has entered an era where monetary management will require a blend of historical wisdom, technological foresight, and strategic neutrality. If executed well, this refined regulatory touch could become the backbone of India’s march toward becoming a top-three global economy.
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