In firing a policy bazooka to support growth, India’s central bank may have overlooked the consequences for its mandate

“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.It is against this background that Governor Malhotra chaired his sixth and last MPC meet in 2025. But if the MPC had any anxieties about how the actions of a whimsical man in the White House could affect us, Governor Malhotra’s statement, just four days short of the anniversary of his first year in office, gave no hint of it. On the contrary! The T (tariff) word does not appear even once in