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Chapter 5 — Economy
Economy

Navigating the New Normal: The Higher-for-Longer Interest Rate Era

With Fed at 3.6-3.75% and ECB at 2%, elevated rates are changing emerging market dynamics. India shows resilience.

SD
Mr. Shakeel Dhada
Analyst, World Development Council
February 2026 · 9 min

Inflation has remained high in advanced economies, keeping interest rates elevated into 2026.

Higher global rates are no longer a storm to wait out — they are the new climate. Only structurally strong economies like India convert volatility into opportunity.

Capital Flows

FDI in India reached $81 billion in FY2025, up 13%. Manufacturing and tech sectors benefit from China-alternative positioning.

Currency Pressures

Rupee expected at 89/USD by March 2027. RBI held rates at 5.25%. EM local real rates at 20-year highs.

Interest RatesEmerging MarketsRBI

Discussion

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Rajat Sagar Jain Mar 18, 2026
India is clearly winning the competition for selective capital inflows among emerging markets.
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