Shocks are inevitable. Currencies come under pressure, economies are hit by unexpected disturbances, companies fail, financial vulnerabilities accumulate, and geopolitical orders fragment. The real test of a system is not whether it can prevent every disruption. It is whether it has enough buffers, flexibility and institutional capacity to absorb the blow without turning stress into breakdown.
Our first editorial today, “Defending the rupee”, looks at India’s response to balance-of-payments pressure and a weakening currency. The RBI has several tools, including forex reserves and measures to influence liquidity and capital flows. These can reduce volatility and help prevent disorderly market movements. But they are ultimately shock absorbers, not substitutes for stronger fundamentals. Lasting external stability will depend on better export performance, more durable capital inflows and a current account that can withstand global turbulence.
The second editorial, “A Nobel for shocks”, takes the idea into macroeconomics. The Nobel-recognised work discussed in the editorial helped economists understand how unexpected disturbances travel through economies and why some shocks fade quickly while others produce prolonged effects. Frictions in labour, prices, finance and expectations can amplify disturbances, while policy can either cushion or worsen them. The lesson is not that economies can be made shock-proof, but that understanding transmission matters enormously when disruption arrives.
M S Sahoo and Sanjeev Pandey’s column, “Maximising value, not the haircut”, applies the logic to insolvency. Corporate failure is itself a shock, but the IBC should not be judged only by the gap between creditors’ original claims and eventual recoveries. Once a company is distressed, much of its value may already have been destroyed. The more meaningful question is whether the resolution process preserves and maximises what remains, keeps viable assets productive and reallocates resources efficiently. The purpose of insolvency is not to pretend the loss never happened, but to prevent further destruction.
Anoop Singh’s column, “Are financial risks now building?”, turns to the financial system as a whole. Stretched valuations, non-bank finance, fiscal pressures, technological change and geopolitical uncertainty can interact in ways that are difficult to predict. The challenge for policymakers is to identify vulnerabilities early, maintain adequate buffers and ensure risks do not migrate unnoticed across markets and institutions. Financial stability depends on resilience before the shock, not improvisation after it.
“Middle powers’ unconvincing new statecraft”, Talmiz Ahmad’s review of Workarounding, edited by Maximilian Mayer, Gedaliah Afterman, Narayanappa Janardhan & Laura Mahrenbach, looks at geopolitics. As the international order becomes more fragmented, middle powers are experimenting with new coalitions and workarounds. But whether these arrangements can genuinely absorb geopolitical pressure or provide strategic room remains uncertain.
Disruption cannot always be stopped, show these pieces. Resilience lies in what happens next.
