If central banking were a card game, RBI Governor Sanjay Malhotra would be holding a pair of twos — not bad enough to fold, not good enough to bet big. And that, say most economists, is exactly why the Monetary Policy Committee is expected to keep the benchmark repo rate unchanged when it announces its decision this Friday.
The Numbers Tell the Story
Headline inflation has settled near the 4% target — comfortable territory for the MPC. But GDP growth has dipped below 6.5% for two consecutive quarters, the weakest run in over a year. Urban consumption is patchy. Rural demand, while recovering, remains fragile.
In this environment, cutting rates could stoke inflation. Raising them could choke a recovery that hasn't fully taken hold. The safest move? Do nothing. Wait. Watch.
What Markets Are Watching
Bond traders have already priced in a hold, with 10-year yields flat ahead of the decision. But the real action will be in the fine print — the RBI's revised GDP and inflation forecasts, and any shift in the committee's policy stance from "neutral" to something more dovish.
Global headwinds add another layer of complexity. The US trade deal has strengthened the rupee, but crude oil remains volatile, and the expiry of the New START nuclear treaty has rattled geopolitical risk premiums.
The Malhotra Factor
This is only the second policy meeting under Governor Malhotra, who took over from Shaktikanta Das in December. His communication style — more data-driven, less theatrical — has won plaudits from markets. Friday's press conference will be closely watched for any signals about when the first rate cut might actually come.