There was a time when the Reserve Bank of India was described almost like a professional fire brigade—always on call to douse the inflation fire, even if it meant soaking growth prospects in the process.
That was the era when Governor Shaktikanta Das had to anchor expectations, break the back of price pressures and rebuild credibility by keeping inflation within the 2–6% band after a brutal global commodity shock.
Inflation control was not a choice then; it was a survival imperative. Under Governor Sanjay Malhotra, the story has clearly moved to its next chapter: the fire is largely under control, and the same institution is now being asked to help design the city’s new skyline. The recent 25 basis point cut in repo to 5.25%, coming after inflation slid well below the lower tolerance band and growth surprised on the upside, is the loudest signal yet that growth is no longer a side character—it is on the headline marquee.
Look at the numbers and the narrative starts to write itself. RBI has revised its real GDP growth forecast for 2025‑26 to around 7.3%, up from earlier estimates near 6.8% arguing that the economy has consistently outperformed earlier projections quarter after quarter.
Even official data show India clocking strong real GDP growth in the previous year, with MOSPI estimates pointing to around 6.5% expansion in 2024‑25, giving Malhotra enough cushion to cut rates without fearing an immediate inflation rebound. This is what economists like to call a “Goldilocks” phase—growth is hot enough to create jobs and profits, but inflation is cool enough to let the central bank take its foot slightly off the brake. The MPC commentary emphasised that disinflation has been sustained, with retail inflation drifting below the lower end of the band for the latter half of the year, freeing policy to lean more aggressively towards supporting growth.
But RBI alone cannot manufacture a growth miracle; it can only create the financial weather in which growth‑friendly decisions become easier. The heavy lifting on the ground is coming from a series of structural reforms that the Modi government has been willing to push through despite political noise.
The four Labour Codes, now operational, consolidate and modernise dozens of legacy labour laws to make compliance simpler, hiring more flexible and social security more predictable—a combination designed to boost formal job creation while preserving worker protection. On the tax side, GST rationalisation and better compliance tracking have turned what once looked like a messy transition into a powerful engine of revenue stability, with GST collections growing around 9% in April–October 2025, signalling both healthy consumption and improved tax discipline. Chief Economic Advisor V. Anantha Nageswaran has been explicit that reforms in labour, GST and the new personal income tax regime are not just incremental tweaks; they are quietly raising the efficiency and competitiveness of the entire economy.
When a growth‑tilted RBI meets a reform‑driven government, the synergy is much larger than the sum of its parts. Cheaper capital through a lower repo rate, combined with strong public capex and cleaner corporate balance sheets, can crowd in private investment in manufacturing, infrastructure and services.
The government’s continued capex push and reforms ensure that every rupee of lower interest cost has more productive avenues to go into—industrial capacity expansion, logistics upgradation, energy transition and digital infrastructure—rather than speculative froth. The external validation is already visible in multilateral forecasts: The IMF has India at around 6.5% growth for FY25 and FY26, the World Bank is a shade higher near 6.7%, and domestic projections for FY26 are now being nudged towards the 7%–plus zone as data keep beating expectations. In other words, the rest of the world is slowly pricing in what North Block and Mint Street are trying to engineer—a glide‑path towards sustained high growth with moderate inflation.
Of course, this story is playing out against an unfriendly global backdrop, and that is precisely where the macro‑management deserves more attention. Higher global tariffs, including the aggressive tariff stance from a protectionist United States, should logically have dented India’s export momentum and risked a sharper slowdown. Yet, the economy has continued to post robust quarterly growth, helped by resilient domestic demand and the gradual diversification of export markets and product baskets. Global agencies still project India in the 6.3–6.8% band for FY26 even as they trim growth estimates for many advanced and emerging peers, which effectively means India is gaining relative weight in the global growth mix. Add to this a relatively stable macro framework—manageable current account deficit, healthy forex reserves and a flexible exchange rate that Malhotra describes as being allowed to “find its correct level”—and you get an economy that can absorb external shocks without giving up its growth ambitions.
In that sense, the real transformation underway is not just that an inflation‑obsessed RBI has turned into a growth‑friendly central bank. The deeper change is that India is attempting something that very few large emerging markets have pulled off—using a disciplined, rules‑based monetary policy to lock in low inflation, while leveraging politically difficult structural reforms to push the potential growth rate higher. If Malhotra’s growth‑first tilt manages to coexist with the inflation discipline inherited from the Das years, and if the Modi government keeps its foot firmly on the reform accelerator, the 7–8% growth range may stop looking like a post‑pandemic rebound and start feeling like the new normal.
