India’s resilience to global shocks built on broad reforms: Shaktikanta Das

What does “economic resilience” mean when a country faces global shocks?

Economic resilience means an economy can withstand disruptions and recover without suffering lasting damage. Shocks may include wars, pandemics, energy-price swings, inflation, or financial stress. It matters because no country can prevent every external crisis.

Das said resilience comes from systems that keep essential activity moving. Stable inflation, healthier banks, digital payments, public infrastructure, and diversified trade can spread and soften shocks. During Covid-19, India’s digital public infrastructure helped transfer support quickly.

India’s recent results suggest considerable resilience, although they do not eliminate risks. Real GDP grew 7.8% in the first quarter of the current financial year, while the current-account deficit was 0.6% of GDP in FY2025-26. Das argued that sustaining reforms is essential as India pursues the Viksit Bharat 2047 goal.

Which reforms does Shaktikanta Das say helped make India more resilient?

Das says India’s resilience grew from broad reforms introduced or strengthened over the past decade. They were designed as long-term buffers, not one-off responses. Their purpose was to improve stability, formalisation, financial access, and the economy’s ability to recover.

The reforms include flexible inflation targeting, introduced in 2016, and GST, introduced in 2017. He also highlighted digital payments and the Jan Dhan-Aadhaar-Mobile framework, which supported rapid benefit transfers. Banking reforms restored financial-sector health and reduced bad loans. Fiscal consolidation and external-sector management were also important.

The broader reform agenda included infrastructure, logistics, energy, manufacturing, and welfare delivery. Das cited Gati Shakti, the National Logistics Policy, Sagarmala, Udan, and energy diversification. Together, these measures strengthened governance, macroeconomic stability, and productive capacity—the three pillars he identified.

How did measures such as inflation targeting, GST, digital payments and banking reforms help India absorb shocks like the pandemic and the war in Ukraine?

Inflation targeting helped anchor price expectations and gave policymakers a clearer framework during successive shocks. GST created one national market, reduced tax-on-tax effects, and improved compliance. Digital payments and JAM allowed government support to reach people quickly, even when normal activity was disrupted.

Banking reforms addressed weak balance sheets and improved lending capacity. Lower bad loans made banks more able to support households and businesses. Direct benefit transfers also reduced welfare leakages, with estimated savings of around ₹5.1 trillion. These mechanisms complemented one another rather than operating separately.

Das said flexible inflation targeting helped India navigate the pandemic and the war in Ukraine. By June 2026, banks’ gross non-performing assets had fallen to 1.68%. The lesson is that resilience requires continued reform, because future shocks may test prices, public finances, banks, and supply chains at the same time.

How strong are the economic results cited by Das, including 7.8% real GDP growth, a 0.6% current-account deficit and bank bad loans of 1.68%?

Das’s figures describe an economy growing quickly while maintaining important safeguards. Real GDP growth of 7.8% in the first quarter signals strong expansion after adjusting for price changes. A current-account deficit of 0.6% of GDP is relatively limited, suggesting external payments were not heavily imbalanced.

Bank health is another major strength. Gross non-performing assets stood at 1.68% in June 2026, while profitability had improved significantly. Das also reported average annual GDP growth of 7.9% during the five years from FY2021-22 to FY2025-26. Together, these numbers point to growth, external stability, and improved financial-sector capacity.

The results are strong, but they are not a guarantee against future shocks. India still faces wars, geopolitical fragmentation, energy volatility, inflation, and technological restrictions. Das’s message was therefore to sustain reforms, fiscal consolidation, and investment so strong performance becomes durable rather than temporary.

What are the three broad pillars Das identifies behind India’s resilience, and how do they reinforce one another?

The first pillar is stronger governance and state capacity. Better infrastructure, sanitation, housing, electrification, financial inclusion, digital services, and welfare delivery can build public confidence. The second is macroeconomic stability, covering inflation, government spending, tax reform, financial-sector health, and the external sector.

The third pillar is investment in long-term productive capacity. This includes infrastructure, logistics, energy, and manufacturing. For example, Gati Shakti and the National Logistics Policy aim to improve connectivity and market integration. Digital systems also make welfare delivery faster, supporting trust in government.

These pillars work as a system. Good governance helps reforms reach citizens and businesses. Stability makes it safer to invest and plan. Investment raises productivity, strengthens supply capacity, and supports future growth. Das said India’s logistics ranking improved from 54 in 2014 to 38 in 2023, showing how institutional and physical improvements can reinforce resilience.

Why does keeping public debt and inflation under control give a government more ability to respond to future crises?

Public debt and inflation matter because crises often require government action. A government with manageable debt can borrow or redirect spending to support households, businesses, banks, or infrastructure. High debt, by contrast, can push up borrowing costs and limit fiscal space when help is most needed.

Inflation control protects real incomes and reduces uncertainty. It also gives policymakers more room to keep interest rates and public support measures focused on the shock. Das noted that advanced economies’ public debt averages close to 110% of GDP, contributing to rising bond yields and reduced room to respond.

India’s policy focus includes fiscal consolidation and a roadmap to reduce government debt to 50% of GDP by March 2031. Flexible inflation targeting has helped navigate major shocks since 2016. Keeping both pressures under control does not prevent crises, but it makes the response more credible and sustainable.

What is real GDP, and why is its growth rate used to judge whether an economy is expanding?

Real GDP is the inflation-adjusted value of all final goods and services produced within an economy. Removing price changes makes comparisons more meaningful across years. If output rises while prices stay constant, real GDP increases. If prices rise but production does not, nominal GDP may rise while real GDP does not.

That is why economists use real GDP growth to judge expansion. It focuses on changes in actual production and economic activity. In the article, Das reported that India’s real GDP grew 7.8% in the first quarter of the current financial year. This indicates substantial output growth after accounting for inflation.

Real GDP is useful but incomplete. It does not by itself show how income is distributed, whether growth is environmentally sustainable, or how living standards change for every household. Still, alongside employment, inflation, debt, and financial-sector data, it provides a central measure of economic momentum.

Key Facts:

📌 Resilience means absorbing shocks and recovering quickly.

📌 Reforms create buffers that help economies keep functioning.

📌 India’s current-account deficit was 0.6% of GDP in FY2025-26.

📌 Flexible inflation targeting began in 2016.

📌 GST created an integrated national market from 2017.

📌 JAM enabled rapid transfers during the pandemic.

📌 Inflation targeting helped India navigate the pandemic and Ukraine war.