The MPC’s Most Overdue Cut

Friday, RBI Governor Sanjay Malhotra will walk into the MPC press conference carrying the usual central banker’s toolkit: one inflation forecast, one growth forecast, one neutral stance, several escape hatches, and a sentence beginning, “Monetary policy is not a preset course of action.”

The market, meanwhile, will arrive with its own shopping list. Repo unchanged? Fine. Stance neutral? Also fine. Liquidity sufficient, proactive and pre-emptive? Lovely.

But there is one cut the market would applaud: the Goldilocks trope. It is one fairy tale the market has grown tired of.

Goldilocks has had a distinguished career in Indian macro commentary. She entered when growth was hot enough, inflation was cool enough, and policy porridge appeared to be just right. But since then, crude oil has entered the cottage, global uncertainty has eaten from all three bowls, and the rupee has become the loudest bear in the room.

At this point, Goldilocks may need less forward guidance and more parental guidance.

The Governor can, with a wry smile, say: “The MPC has decided to keep the policy rate unchanged. It has retained the neutral stance. It has, however, unanimously resolved to evict Goldilocks from the statement.”

Bond traders would rally. Equity traders would call it reform. Currency traders would ask whether the eviction is temporary or structural.

To be fair, April gives Malhotra plausible deniability. Goldilocks did not really wander into the policy statement or press conference. She was spotted in the minutes, doing what literary characters do when economists let them into official communication: overstaying the metaphor. But markets have elephantine memories, especially for phrases that can be put in headlines before lunch.

So, Friday’s first request is simple: no Goldilocks. No porridge. No “just right.” India can be strong without being served in a bowl.

Resilient Resilience

The second candidate for temporary retirement is resilience. Resilience has served the Republic well. It has survived COVID, Ukraine, tariffs, West Asia, crude, capital outflows, weather risks, and every analyst note beginning “amid heightened uncertainty.” But the word is now so resilient that even resilience may be tired of being resilient. Perhaps it can be placed in the Standing Deposit Facility overnight and released only when inflation breaches the tolerance band.

Then comes robust. Growth is robust. Consumption is robust. Manufacturing is robust. Balance sheets are robust. Banks are robust. External financing is robust. Even uncertainty, by now, is robust. If “robust” appears again, markets may ask whether it is seasonally adjusted, excluding precious metals.

Nimble and agile also need harmonisation. Both are elegant words. Both signal optionality. Both help central bankers move without appearing to run. But having both in the same policy universe feels like regulatory duplication. One should be merged into the other under a Master Direction on Adjectival Rationalisation. “Nimble” can handle the press conference; “agile” can supervise liquidity operations.

Wait and watch remains indispensable, but it deserves better working conditions. It has been on duty through crude spikes, ceasefires, capital flows, and changing inflation series. The phrase now works harder than a call money dealer on reporting Friday. Perhaps, the Governor can upgrade it to “watch carefully and wait judiciously”.

Incoming information is another overachiever. Information has been incoming for so long that it may soon require CKYC. Every policy is dependent on incoming information, evolving circumstances, changing circumstances, and the balance of risks. But after a while, the MPC starts sounding like an airport arrivals board: “Inflation print delayed. Crude shock landed. Monsoon guidance expected. Core CPI is now arriving at Gate 4.”

Balance of risks should stay, but perhaps with a warning label. The risks may be balanced; traders rarely are. Put “upside inflation risks” too close to “neutral stance,” and the bond market will immediately convert adjectives into basis points.

Supply shock cannot be retired; it is doing real analytical labour. But perhaps it can be given an assistant: “pass-through.” Supply shock is carrying crude, freight, fertiliser, imported inflation, confidence, growth sacrifice, and every awkward question in the press room. Even a shock needs shock absorbers.

The Governor’s great charm is that he can sound calm without sounding casual. “We need to wait and watch” from him does not sound like procrastination; it sounds like risk management wearing a clean white shirt. “Not a preset course” is central-bank poetry: enough certainty to calm, enough uncertainty to trade.

So, the market’s actual expectation for Friday is not dramatic. Repo may remain where it is. Neutral may remain neutral. Liquidity may remain sufficiently sufficient. The real relief rally would come from one small act of linguistic tightening: Goldilocks walks out, resilience takes leave, and robust is asked to work from home.

India does not need to be Goldilocks. It only needs growth, inflation and crude to stop auditioning for the Three Bears.