With tariffs, remittance risks, and neighbourhood instability mounting, the MPC must evolve into a platform for actionable guidance, not ceremonial forecasts.

By Ravishankar Kalyanasundaram

Every two months, the Reserve Bank of India’s Monetary Policy Committee (MPC) gathers in Mumbai. The ritual is familiar: the Governor’s speech, the announcement of the repo rate, and the parsing of every phrase by bond traders and television anchors. It projects calm order, a theatre of stability.

But outside that chamber, the world is in flux. Tariffs are imposed overnight in Washington. Immigration policies in the West threaten Indian professionals and the remittances they send home. Neighbourhood economies in Nepal, Bangladesh, and Sri Lanka are reeling. Global supply chains fracture, energy markets jolt, and capital moves with the speed of a tweet. Against this backdrop, to focus policy discussions almost exclusively on the repo rate is to look inward while a storm rages outside.

Beyond the Binary

Central banks gain credibility not from ritual but from range. The repo is a signal — not a shield.

India’s own history makes this clear. In 1991, when reserves collapsed, credibility was restored not by tinkering with the repo but by pledging gold and unleashing sweeping reforms. In 2008, during the global financial crisis, MPC reviews were paired with sharp cuts in the Cash Reserve Ratio, liquidity windows for NBFCs, and relaxed prudential norms. In 2013, as the taper tantrum drove the rupee down nearly 20 percent, stability came from liquidity tightening, curbs on gold imports, and special swap lines for NRI deposits. After demonetisation in 2016, policy meetings guided liquidity absorption through Market Stabilisation Scheme bonds. And in 2020, as Covid froze demand, rate cuts did little because banks had stopped lending; what saved the system were moratoriums, Targeted Long-Term Repo Operations, and regulatory forbearance.

In every crisis, survival came from non-repo tools — the very instruments too often treated as supplementary notifications or buried in press releases. As former RBI Governor Raghuram Rajan has observed, “Credibility comes not from ritual, but from showing markets that you have the flexibility and the will to respond to the situation as it unfolds.”

Lessons from Abroad

Other central banks do not hesitate to make this breadth visible. The U.S. Federal Reserve commands attention not only through its rate but also through balance-sheet moves, swap lines with peers, and explicit guidance on global risks. The European Central Bank during the eurozone crisis restored credibility with Draghi’s “whatever it takes,” backed by massive bond purchases. The Bank of Japan has long treated the repo as symbolic, focusing instead on yield-curve control and direct market interventions. The People’s Bank of China openly manages credit, capital flows, and exchange rates as instruments of policy.

India, too, acts with agility — quietly intervening in forex markets, nudging banks, tightening norms, and opening liquidity windows. Yet the public face of the MPC remains dominated by the repo. The ceremony overshadows the substance.

Trade and Economy Need More Than Weather Announcements

The August 2025 review showed how costly this can be. The risks were visible: Trump’s new tariffs, a weakening rupee, unrest in Nepal and Sri Lanka, Pakistan’s renewed American courtship, capital flight from emerging markets. The Governor admitted it was “difficult to predict the impact” of U.S. tariffs. Yet the decision, as always, revolved around the repo: left unchanged at 5.50 percent, inflation trimmed, GDP reaffirmed.

What the public did not hear was a plan to defend the rupee, cushion exporters, or prepare for remittance shocks. The tools that have repeatedly saved India — forex swaps, liquidity windows, macroprudential buffers — were absent from the narrative. Acknowledgment without action becomes indistinguishable from ritual without relevance.

Action, Not Acknowledgment

That hierarchy must now change. Exporters facing tariffs need clarity on working capital and hedging backstops, not platitudes about “uncertainty.” Households reliant on remittances need reassurance that swap lines and forex reserves are being readied. Investors need guidance on how capital flight will be cushioned. As Kaushik Basu has noted, “Markets punish hesitation more than they punish error.” The MPC, by reducing itself to repo binaries, risks looking hesitant at a time when confidence is paramount.

RBI does acknowledge global risks, but it lets the substantive measures trail off into fine print. Protecting the economy from tariff wars, remittance shocks, currency volatility, and neighbourhood instability requires immediacy. Without it, the damage could be not just costly but lethal to growth, stability, and trust.

Repurposing the Ritual

The MPC meeting need not be confined to a binary verdict. It could be India’s stage of resilience — where exporters, investors, chambers of commerce, and ministries hear how the central bank interprets global tremors and intends to respond. Imagine if each review concluded with a “storm warning”: guidance on tariffs, remittances, capital flows, and geopolitical risks, paired with concrete levers being readied. That would transform ritual into relevance.

For an economy as exposed as India’s — import-dependent, remittance-reliant, and situated in a fragile neighbourhood — this is not optional. The world no longer runs on neat inflation-growth charts; it runs on shocks that cross borders before a committee can finish its minutes.

The Heart of the Argument

India is not Switzerland or Canada, insulated by small size or commodity wealth. It is a vast, import-dependent economy, reliant on remittances and vulnerable to sudden reversals of capital. RBI has already shown it can act decisively — but too often hides that agility in the shadows.

These non-repo measures are not afterthoughts; they are strengths. They demonstrate India’s ability to adapt to geopolitics, deglobalisation, and immigration shocks. They should be the centrepiece of communication, not the footnotes.

The repo will always remain a signal. But the signals India most needs now are about resilience, not ritual. To persist with a narrow script risks being remembered as complacency. Observers have long noted this: in 2013, when the rupee crashed during the taper tantrum, RBI was accused of reacting too late. Commentators since have extended that critique to the MPC, pointing to a “repo-centric blind spot” that continues to limit its effectiveness.

The storm is outside, but the ritual is still inside. The time has come to repurpose it.