In an era of unprecedented global economic volatility—from pandemic disruptions to geopolitical tensions and climate challenges—a remarkable phenomenon has emerged: the surprising resilience of emerging market economies, particularly India. Two of the world’s most respected economists, Raghuram Rajan and Gita Gopinath, have offered valuable insights into this resilience. Their perspectives are particularly significant given their roles as former Reserve Bank of India Governor and current First Deputy Managing Director of the IMF, respectively.
The Evolution of Emerging Market Resilience
The global economic landscape has transformed dramatically over the past two decades. Emerging markets, once considered highly vulnerable to external shocks, have demonstrated remarkable stability during recent crises. This shift didn’t happen by accident but resulted from deliberate policy choices and institutional reforms.
According to Raghuram Rajan, emerging markets have undergone a fundamental transformation in their monetary policy approaches, making them significantly more resilient to global economic turbulence. This represents a major departure from historical patterns, where emerging economies were often the first casualties of global financial disruptions.
Gita Gopinath has similarly noted that emerging markets have shown “considerable resilience over these past few years” despite facing unprecedented shocks. She attributes this to “significant steps already taken over the last two decades to strengthen EM policy frameworks.”
Inflation Targeting: A Game-Changer
One of the most critical policy innovations has been the widespread adoption of inflation targeting frameworks by emerging market central banks. This approach, pioneered by advanced economies, has been adapted effectively to the unique challenges facing developing nations.
Gopinath has praised emerging markets for their robust monetary strategies, highlighting how “strong policy frameworks and commitment to inflation targeting have helped these economies navigate complex economic landscapes.” She emphasizes that “focusing on sound communication about committing to inflation, targeting on anchoring long-term inflation expectations” is “very critical for the emerging markets.”
This disciplined approach to monetary policy has yielded tangible benefits. Many emerging markets, including India, have successfully tamed the inflation demons that plagued them for decades. When global inflation surged following pandemic-related disruptions and the Russia-Ukraine conflict, these economies proved better equipped to manage price pressures than in previous cycles.
India’s Standout Performance
Among emerging markets, India has demonstrated particularly impressive resilience. Current projections show India maintaining growth above 6% (specifically 6.2% in 2025 and 6.3% in 2026) while many other economies struggle with lower growth rates. This performance is especially notable given that it outpaces China’s forecast by more than 2 percentage points.
Several factors contribute to India’s exceptional position:
- A robust monetary policy framework: The Reserve Bank of India has maintained policy credibility through disciplined inflation targeting, even during periods of political pressure.
- Domestic consumption strength: India’s large internal market provides a buffer against global trade disruptions.
- Digital infrastructure: The rapid development of digital public goods and financial inclusion has created new economic resilience.
- Demographic advantage: A young, growing workforce continues to drive economic expansion.
Rajan’s leadership at the RBI played a significant role in establishing the inflation targeting framework that has served India well. During his tenure (2013-2016), he emphasized the importance of price stability as a foundation for sustainable growth—a position that has been validated by subsequent events.
The Importance of International Coordination
While praising emerging markets’ improved resilience, both economists emphasize that no country is an island in today’s interconnected global economy. Rajan has been particularly vocal about the need for better international coordination among central banks.
At a Brookings Institution event, Rajan called for improved coordination, expressing concern that the Federal Reserve wasn’t paying sufficient attention to the ripple effects its policies have on emerging markets. He advocated for a “rules-based international framework” that would help countries “avoid policies with large spillovers, develop resilient markets, and benefit from capital flows while managing risks to financial stability.”
This perspective highlights a crucial point: while emerging markets have become more resilient, they remain vulnerable to decisions made in Washington, Frankfurt, and other global financial centers. Advanced economy central banks still tend to prioritize domestic mandates over international spillovers, creating challenges for emerging economies.
Three Pillars of Enhanced Resilience
Gopinath has outlined three broad strategies for emerging markets to further strengthen their resilience in the face of tougher external conditions:
- Boosting domestic resources: Improving tax collection, broadening the tax base, and enhancing public expenditure efficiency can create fiscal space for both development needs and crisis response.
- Enhancing financial system resilience: Building stronger regulatory frameworks, deepening local capital markets, and implementing macroprudential policies can reduce vulnerability to external financial shocks.
- Implementing sustainable climate strategies: Addressing climate vulnerabilities through adaptation and mitigation not only protects against physical risks but can unlock new growth opportunities.
These strategies recognize that resilience isn’t just about monetary policy but requires a comprehensive approach spanning fiscal, financial, and environmental dimensions.
The Role of Access to Finance
Beyond macroeconomic policies, Rajan’s research has highlighted another crucial element of resilience: access to finance. His studies on climate adaptation show that “enhancing access to finance can enable communities to adapt to large adverse climatic shocks, and limit migration.”
This insight has important implications for emerging markets facing various shocks. Financial inclusion and deep credit markets provide crucial cushioning mechanisms that allow households, businesses, and communities to weather external disruptions. India’s push for financial inclusion through initiatives like Jan Dhan Yojana aligns with this research-backed approach.
Democracy and Economic Resilience
Interestingly, Rajan has also emphasized the connection between democracy and economic resilience. In a speech at the Ideas for India Conference, he “argued that India’s democracy is the path to its economic growth,” suggesting that democratic institutions provide important checks and balances that contribute to sustainable economic development.
This perspective challenges simplistic narratives that sometimes portray authoritarian systems as more effective at implementing economic reforms. Instead, Rajan’s view suggests that democratic debate, while sometimes messy, ultimately produces more durable and resilient economic institutions.
The Continuing Challenge of Global Economic Governance
Despite the progress made by emerging markets in building resilience, both economists highlight the ongoing challenges in global economic governance. Rajan has noted that if we are to “find ways to use capital flows well—to meet the saving needs of rich aging countries while also fulfilling the financing needs of developing and emerging market economies, without precipitating periodic crises—countries will have to temper their sovereign policymaking with their international responsibilities to avoid major spillovers.”
This vision calls for a more inclusive and balanced approach to global economic governance, where emerging markets have a greater voice in shaping the rules that affect them. The IMF, where both Rajan and Gopinath have served in leadership roles, has an important part to play in this evolution.
Conclusion: A Template for Resilience
The insights from Rajan and Gopinath provide a valuable template for understanding and enhancing economic resilience in an increasingly turbulent world. Their analysis suggests that emerging markets, far from being passive victims of global economic forces, can take concrete steps to strengthen their position.
The success stories of countries like India demonstrate that with the right policy frameworks—centered on disciplined monetary policy, financial sector development, and inclusive growth—emerging economies can not only withstand global shocks but continue to advance their development agendas.
As the world grapples with new challenges from technological disruption to climate change, these lessons in resilience will only grow more valuable. By combining macroeconomic discipline with structural reforms and inclusive development, emerging markets can continue their transformation from global economy vulnerability points to centers of stability and growth.
The perspectives of Rajan and Gopinath, grounded in both rigorous research and practical policy experience, offer guidance not just for emerging markets but for all economies seeking to navigate an increasingly complex and interconnected global economic landscape.