The monetary policy panel fired a bazooka in support of growth

In its zeal to support growth, the committee may have overlooked the possible consequences for its mandate of price stability

- MYTHILI BHUSNURMATH

“Baptism by fire,” is how D. Subbarao had described his initial months as the 22nd governor of the Reserve Bank of India (RBI).

Subbarao took charge in September 2008 in the shadow of the collapse of investment bank Lehman Brothers that led to the 2008-09 Global Financial Crisis and brought the world economy to its knees. In hindsight, his baptism was a relatively brief affair. Coordinated action by central banks saw the world economy recovering by mid-2009.

Contrast that with the trials of Sanjay Malhotra, appointed the 26th governor of RBI on 9 December 2024. Thanks to the shenanigans of the 47th President of the United States, Donald Trump, there seems to be no end to Governor Malhotra’s ‘baptism by fire’! Just days before his first Monetary Policy Committee (MPC) meeting in early February, President Trump fired his first salvo, signing three executive orders levying tariffs on Mexico, Canada and China.

By the next MPC meet in early April, Trump had fired his ‘Liberation Day’ bazooka, levying ‘reciprocal tariffs’ on most countries, including India. There’s been no let up since. Tariffs have been raised from 25% to 50%, exemptions have been granted selectively (arbitrarily?), our oil imports from Russia have come under fire, as also our exchange rate management. Meanwhile, US arm-twisting on an elusive US-India trade deal continues.