Post by Pahlé India Foundation (PIF)

For years, every monetary policy announcement came down to a single question: what's happening to inflation? This one broke the pattern. The RBI held the rate at 5.25% and kept a neutral stance but the real story was never inflation. It was the rupee. In a new piece for The Pioneer, Samriddhi Prakash, Associate- Strategy & Research at Pahlé India Foundation (PIF), reads between the lines of the latest MPC meeting. Facing a currency under pressure from rising crude, geopolitical uncertainty and capital flight, the central bank chose an unconventional route. Rather than hiking rates and risking growth, or spending down reserves to hold a line in the forex market, it went to work on the capital account widening the Fully Accessible Route to long-tenor government bonds, sweetening External Commercial Borrowings for PSUs, reviving the 2013-style FCNR(B) playbook, and exempting FIIs from tax on government securities. The logic: India's problem isn't overheating demand that monetary tightening can fix. It's an external shock. So the answer is to make India a more attractive place to park stable foreign capital. The market read the signal — the rupee posted its strongest single-day gain in two months. A clear-eyed look at what monetary policy looks like when currency stability, not inflation, sits at the centre of the table. Read the full piece here: https://lnkd.in/gQEcjwct #RBI #MonetaryPolicy #Capital #MPC #Inflation