New Delhi, May 21 -- Policy formulation will see challenges mount in 2026-27 as the effects of the West Asia war unsettle India's growth picture. The high price of oil has exposed its vulnerability, with the reverberations of every policy action or non-action likely to influence other parts of the economy.

Let's start with monetary policy first. The regime of low interest rates is over and the decision that India's central bank must take is when-and by how much-to raise its repo rate. The Goldilocks scenario has turned into a Cinderella syndrome, where all base effects turn negative and inflation pushes aggressively upwards.

This is a global phenomenon. Last year, India managed to counter the US tariff blitzkrieg well. But this year's o...