What does a central bank’s interest-rate decision mean to a household struggling with food prices, a small business deciding whether to expand or a company weighing a new investment? These may seem like very different questions. Yet they lie at the heart of a single economic problem: how do the decisions of households and businesses shape the wider economy and how can public policy influence those decisions?
This question sits at the centre of the work recognised by the 2026 Nobel Prize in Economic Sciences, awarded to Robert E Hall of Stanford University and Michael Woodford of Columbia University “for microeconomic foundations of macroeconomic stabilisation”. Their research helps explain why understanding an economy requires looking beyond aggregate indicators to the choices, expectations and constraints of the people and firms that make it function.
For India, this is more than a theoretical insight. The latest figures show retail inflation rising to 5.54% in September from 4.83% in August, while food inflation climbed to 7.74%. The burden is not evenly distributed: rural headline inflation reached 6.08%, compared with 4.88% in urban areas.
These provisional figures released by the National Statistics Office illustrate why an economy-wide inflation number can conceal very different experiences across households.
For some, rising prices mean postponing...