Stagflation by stealth: Why India’s economic risks are more homegrown than global
· Scroll
The global economy is once again confronting the spectre of stagflation. In textbook terms, stagflation refers to the uneasy coexistence of stagnant or slowing economic growth, high unemployment, and rising inflation – a combination that conventional macroeconomic policy struggles to address effectively.
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Once considered a relic of the 1970s, when oil shocks triggered prolonged periods of high inflation and weak growth across advanced economies, stagflation has re-entered policy discussions as geopolitical tensions in West Asia disrupt energy markets, trade routes and supply chains.
A growing number of global analysts have begun warning of stagflationary risks across both advanced and emerging economies, particularly as oil price volatility and currency pressures intensify.
India, too, is being drawn into this conversation. But to attribute the risk of stagflation in India solely to war would be analytically convenient – and misleading. The more uncomfortable truth is that the building blocks of a stagflationary environment may already exist within the Indian economy, with external shocks merely accelerating their effects.
Robust growth
On paper, India appears resilient. GDP growth is estimated at around 7.4% for 2025-’26, while inflation has remained within the Reserve Bank of India’s tolerance band at roughly 4%-5%. Yet, these headline indicators conceal deeper structural weaknesses.
Unemployment continues to hover at around 6%-6.5%,...