RBI Bulletin Dec2025

     The "Business of Life" in early 2026, as depicted in the sources, centers on a significant shift toward digital self-reliance, the integration of artificial intelligence into daily accessibility, and a blockbuster year for the global entertainment industry.

The Shift to Personal Cloud Storage

• Subscription Squeeze: Indian households are increasingly moving away from public cloud services like Google Photos and iCloud due to a "subscription squeeze." Following the end of unlimited free storage in 2021, users now face high recurring costs; for example, a 2TB plan can cost up to ₹7,800 annually.
• The "Exit Ramp": A new consumer category of personal cloud storage is emerging, with devices like the Synology BeeStation offering a plug-and-play experience that mirrors public clouds without monthly fees.
• Data Sovereignty: Beyond cost, this move is driven by a desire for privacy and ownership following high-profile data breaches and concerns about AI platforms training on personal photos.

blockbuster Entertainment and Gaming

• Blockbuster 2026: The gaming industry is preparing for its biggest year in a decade, headlined by the November 19 release of Grand Theft Auto VI. Other anticipated titles include Resident Evil: Requiem (February 27), 007: First Light, and Marvel’s Wolverine.
• TVs Fight Back: At the 2026 Consumer Electronics Show (CES), TV manufacturers are leveraging AI to personalize imagery and audio to lure users away from their 6-inch smartphone screens back to massive, smarter home displays.

High-Tech Accessibility and Mobility

• Uber Robotaxis: Uber is set to launch its all-electric "Gravity" robotaxis later in 2026. Developed with Nuro, Lucid, and Nvidia, these vehicles feature interactive screens allowing passengers to control climate and music while the AI handles the driving.
• Smart Glasses for the Visually Impaired: New accessibility tech showcased at CES includes AI-powered glasses that describe surroundings for blind users, with startups like Agiga and Envision leading the ecosystem.

Lifestyle, Culture, and Luxury

• Luxury Real Estate: High-end living remains a priority for the affluent, with developments such as luxury mansions in Igatpuri being marketed at price points between ₹3.5 crore and ₹4.5 crore.
• Cinema and Politics: In Tamil Nadu, the intersection of lifestyle and governance is prominent as box-office star Vijay prepares his political party, the TVK, for the 2026 assembly elections, hoping to convert a massive global fan base into political capital.
• Cultural Recognition: The music industry is seeing new forms of prestige, such as the introduction of a Grammy category for album cover art, recognizing the creative minds behind visual storytelling in music.

To understand the current state of personal life and technology, one might view the shift to personal clouds as "building a digital fortress": people are no longer content to rent space in the high-rent districts of big-tech servers and are instead investing in owning their own secure digital property.

The "State of the Economy" in the December 2025 RBI Bulletin is characterized by a "rare goldilocks period" of robust growth and exceptionally benign inflation, despite a challenging and divergent global environment.

1. Exceptional Growth and Demand Conditions

The Indian economy demonstrated remarkable resilience, achieving a six-quarter high real GDP growth of 8.2 per cent in Q2:2025-26.

• Drivers of Growth: This pick-up was primarily underpinned by resilient domestic demand, specifically private consumption, which was facilitated by the rationalization of Goods and Services Tax (GST) rates and strong festive season spending.
• Sectoral Performance: On the supply side, Real Gross Value Added (GVA) expanded by 8.1 per cent in Q2, driven by buoyant industrial and services sectors. Agricultural prospects remain bright due to healthy kharif production and higher reservoir levels supporting better rabi crop sowing.
• Consumption Patterns: Rural demand remains robust, while urban demand is recovering steadily, as evidenced by retail passenger vehicle sales growing at their highest pace in over a year during November.

2. Unprecedented Disinflationary Trajectory

The period since the October policy has been marked by a faster-than-anticipated decline in inflation, reaching levels that are historically low.

• Breaching the Threshold: For the first time since the adoption of flexible inflation targeting (FIT), average headline inflation (1.7 per cent in Q2) fell below the lower tolerance threshold of 2 per cent. In October 2025, inflation dipped to a mere 0.3 per cent, primarily due to a significant correction in food prices.
• Core Inflation Stability: While core inflation (CPI excluding food and fuel) remained largely contained at 4.3 per cent, it reached an all-time low of 2.4 per cent when excluding the impact of precious metals like gold and silver.

3. External Sector Resilience and Global Divergence

The sources highlight that India's external sector remains resilient despite global trade uncertainties and policy shifts.

• Current Account and Trade: The Current Account Deficit (CAD) moderated to 1.3 per cent of GDP in Q2:2025-26, supported by robust services exports and strong remittance receipts.
• Foreign Reserves: As of late November 2025, India’s foreign exchange reserves stood at US$ 686.2 billion, providing a robust import cover of more than 11 months.
• The Global Setting: Globally, economic activity is expanding at a steady but slower rate. There is a noted divergence in monetary policy: while the US and UK have begun rate cuts due to soft labor market conditions, Japan increased its policy rate to a 30-year high.

4. Fiscal and Financial Stability

The fiscal position of the government and the health of financial institutions provide a stable foundation for continued momentum.

• Government Finances: Both the Centre and States have demonstrated commitment to prudent fiscal management, containing revenue expenditure while maintaining capital expenditure to boost medium-term growth.
• Banking System Health: Financial parameters such as capital adequacy, asset quality, and liquidity remain robust for both Scheduled Commercial Banks (SCBs) and NBFCs. Bank credit growth has seen an uptick, particularly to the MSME and services sectors.

5. Statistical and Technological Context

The December 2025 Bulletin also emphasizes the modernization of India's statistical systems to keep pace with a diversified and digital economy.

• Data Integrity: There is an ongoing focus on base revisions for CPI, GDP, and IIP to better capture evolving consumer preferences and financial inclusion.
• Digital Sovereignty: Speeches within the Bulletin warn that Stablecoins pose risks to monetary sovereignty, seigniorage, and financial stability, leading the RBI to promote Central Bank Digital Currencies (CBDCs) as a superior, regulated digital innovation.

---

Analogy for the State of the Economy: Imagine an elite marathon runner who has not only maintained a world-leading pace (8.2% growth) but has also managed to breathe more easily than ever before (0.3% inflation). While other runners on the track (global economies) are struggling with uneven conditions and shifting winds (policy divergence and geopolitical risks), this runner has stocked up on plenty of water (forex reserves) and is wearing more efficient, high-tech gear (GST reforms and digital infrastructure) to ensure a long, steady finish.

The speeches and insights featured in the December 2025 RBI Bulletin serve as a strategic roadmap for India’s financial architecture, addressing long-term structural, technological, and ethical challenges that complement the immediate decisions of the Monetary Policy Committee,. While the Monetary Policy Statement focuses on the immediate "Goldilocks" balance of growth and inflation, these speeches provide a deeper philosophical framework for preserving monetary sovereignty, enhancing banking resilience, and modernizing national statistics,,.

1. Digital Sovereignty and the Critique of Stablecoins

Deputy Governor Shri T. Rabi Sankar provides a critical assessment of stablecoins, arguing that they do not fulfill the fundamental attributes of money: being fiat-based, representing a single unit of account, and maintaining public trust,.

• Risks to the State: He warns that widespread adoption of stablecoins could lead to currency substitution (dollarization), weakening the RBI’s control over the money supply and interest rates,.
• Loss of Seigniorage: A significant insight involves the loss of seigniorage income, which rightfully belongs to the government as a social function but is diverted to private operators in a stablecoin ecosystem,.
• The CBDC Alternative: To counter these risks, the RBI advocates for Central Bank Digital Currencies (CBDCs), which offer the same technological benefits—such as programmability and atomic settlement—while remaining anchored within the regulated financial system,.

2. Banking Resilience: "Reading the Pitch"

Deputy Governor Shri Swaminathan J. uses a cricket metaphor to outline the evolution of banking risks and strategies for a "long innings",.

• New Categories of Risk: Beyond traditional credit and liquidity concerns, banks now face heightened cyber risks and climate-related financial risks, which must move from back-office functions to central board strategies,.
• Data as "Water": He offers the insight that while data is often called "the new oil," it is actually more like water—essential for life and insights when clean, but capable of causing widespread damage if "polluted" by misuse or lack of privacy.
• Governance and Culture: The common thread in modern banking is the "tone at the top," where ethical culture and robust grievance redressal are viewed as the ultimate safeguards against the speed of digital misinformation,.

3. Microfinance and Macro Momentum

In a separate address, Shri Swaminathan J. links the "micro" of household finance to the "macro" momentum required for Viksit Bharat 2047,.

• Bridging Asymmetry: Microfinance is praised for its ability to provide credit to those with thin documentation and irregular incomes.
• Human-Centric Design: He urges lenders to serve the entire household rather than just the applicant, suggesting that promoting a savings habit and insurance can make credit quality more predictable.
• Regulatory Balance: The RBI’s removal of pricing caps in the 2022 framework came with an expectation of greater accountability, where boards must ensure that technology-driven efficiency benefits the borrower, not just the lender's margins,.

4. Statistical Integrity for Agile Policy

Dr. Poonam Gupta emphasizes that agile policymaking is only possible with "timely and topical" statistics,.

• Modernizing the DBIE: The RBI is redesigning its Database on Indian Economy (DBIE) to include automatic retrieval via APIs and enhanced visualization tools to meet the rising demand for granular data,.
• Base Revisions: Foundational indicators like CPI, GDP, and IIP are undergoing base revisions to reflect an economy that is becoming increasingly diversified, digital, and services-oriented,.
• Unbiased Forecasting: Insights from a recent discussion paper confirm that the MPC’s inflation and growth forecasts have remained unbiased, with no systematic directional deviation from actual results during the inflation-targeting regime.

---

Analogy for the Speeches and Insights: If the Monetary Policy Statement is the driver adjusting the accelerator and brakes of the economy, these Speeches and Insights represent the engineers and architects working on the vehicle's design. They are ensuring the fuel is pure (statistical integrity), the chassis is reinforced against new types of weather (banking resilience), the GPS is secure from hacking (digital sovereignty), and that the vehicle is accessible to every person on the road (microfinance) to ensure a safe journey toward a distant destination.

The technical articles in the December 2025 RBI Bulletin provide a rigorous analytical foundation for India’s current macroeconomic landscape, moving from broad-based surveillance of growth to high-tech predictive modeling using machine learning and neural networks.

1. State of the Economy: Navigating Global Divergence

This flagship article reviews the global and domestic environment, noting that while global uncertainty has retreated from highly elevated levels, India has emerged as a "bright spot" with 8.2 per cent growth in Q2:2025-26.

• Domestic Resilience: The article highlights that domestic demand, particularly private consumption, remains the primary engine of growth, supported by robust urban demand and recovering rural markets.
• Inflation Dynamics: It documents an unprecedented disinflationary trend where headline inflation remained below the lower tolerance level for three consecutive months, even as core inflation reached a new all-time low when excluding precious metals.
• External Strength: Despite volatility in portfolio flows, India’s external sector is described as resilient, with foreign exchange reserves sufficient to cover more than 11 months of imports.

2. Government Finances: A Half-Yearly Review

This review analyzes the fiscal position of the Centre and States during the first half of 2025-26, emphasizing a commitment to prudent fiscal management.

• Quality of Expenditure: Both tiers of government have successfully contained revenue expenditure while prioritizing Capital Expenditure (Capex), leading to a decade-low Revenue Expenditure to Capital Outlay (RECO) ratio for the Centre.
• GST Evolution: The article features a detailed study of eight years of GST reforms, noting that the shift to a simplified two-slab GST framework is expected to further stimulate demand and support formalization of the economy.
• Resource Mobilization: While tax revenues saw some moderation, higher surplus transfers from the RBI and non-tax sources helped the Centre collect nearly half of its budgeted receipts by H1.

3. Composite Leading Indicator (CLI) for Manufacturing

This technical paper develops a new quarterly leading indicator to track the growth cycle of India’s manufacturing sector.

• Advanced Methodology: Using a two-stage procedure, the authors combined machine-learning models—specifically Random Forest and XGBoost—with wavelet analysis to validate the leading properties of different variables.
• Predictive Power: The resulting CLI identifies turning points one quarter ahead of actual GVA-Manufacturing data, boasting a high cross-correlation of 0.86 at a one-quarter lead.
• Key Drivers: The indicator relies on a mix of commodity prices, industrial credit flows, and global variables to provide early signals of shifts in economic momentum.

4. Safe Asset Volatility and Neural Networks

This article addresses the heightened influence of geopolitical tensions on asset market dynamics.

• Asset Heterogeneity: The study finds that different "safe havens" react uniquely to stress: Gold remains the most stable, while crude oil price volatility is acutely sensitive to geopolitical shocks.
• Neural Network Superiority: A major finding is that Nonlinear Artificial Neural Network (ANN) models significantly outperform traditional linear econometric models in forecasting volatility during crises.
• Geopolitical Sensitivity: The analysis suggests that as geopolitical risk escalates, silver and US Treasury securities exhibit intermediate volatility, reflecting their dual roles as both industrial inputs and flight-to-safety assets.

---

Analogy for the Technical Articles: If the Monetary Policy Statement is the captain of a ship making real-time decisions, these Technical Articles are the high-definition radar and sonar systems. The State of the Economy and Government Finances provide the current coordinates and fuel levels, while the Composite Leading Indicator acts as the radar forecasting upcoming storms and the Neural Network model serves as the sonar identifying hidden risks deep beneath the surface of global politics.