New Delhi, March 9 -- Last week, the Central Board of Trustees (CBT) of India's Employees' Provident Fund Organisation (EPFO) fixed the fund's interest-rate payout at 8.25% for 2025-26, the third year in a row at that rate. The decision covers the retirement savings of 73.7 million formal-sector workers. It was received, as usual, with union relief. But can India's monetary policy work when so large a part of its savings system is immune to it?

In 2025, the Reserve Bank of India (RBI) cut its benchmark repo rate four times by a cumulative 125 basis points from 6.5% to 5.25%, the most aggressive easing cycle since 2019. Consumer price inflation fell to 1.33% in December. The logic of lower rates was clear: reduce the cost of capital and l...