Malhotra’s first year as RBI governor saw India’s economy break into a Goldilocks run but we can’t take it for granted

A latter-day dramatist tempted to say the same of the head of a central bank would not be too far off the mark, though, whether it is about Jerome Powell, chairperson of the US Federal Reserve, who has had to face the prolonged ire of President Donald Trump, or anybody else with this unenviably difficult job.

What about the 26th governor of the Reserve Bank of India (RBI)? Ever since techie-turned-bureaucrat Sanjay Malhotra took charge on 11 December 2024, one event after another has rattled the certainty that helps frame monetary policy.

The first meeting of RBI’s Monetary Policy Committee (MPC) chaired by Governor Malhotra was held just days after President Trump fired his first trade salvo, levying tariffs on two of America’s closest allies, Canada and Mexico, apart from archrival China. The second meeting followed Trump’s Liberation Day announcement of ‘reciprocal’ tariffs.

There has been no let up since then. Each of the next four MPC meetings was held under the shadow of either steeper US tariffs or threats of fresh levies.

The rupee, meanwhile, has weakened dramatically. Its slow depreciation has given way to a sharp drop over the past year from ₹84.83 per dollar on 9 December 2024 to ₹90.10 on Tuesday, even as foreign institutional investors pulled a king’s ransom out of India’s stock market in 2025—an estimated $18 billion.

Despite this endless drama and a much-awaited trade deal with the US proving elusive, Malhotra can look back on his first year in office with satisfaction. As an inflation-targeting central bank, RBI is mandated to maintain price stability—specifically, to keep retail inflation in a 2–6% band—while keeping in mind the objective of economic growth.

Under Malhotra’s watch, we have had the best of both worlds. Inflation has steadily declined while growth has held firm. RBI now expects to close 2025-26 with 2% inflation for the year and an economy that is 7.3% larger.

Granted, RBI has repeatedly got its estimates of both variables wrong. But these errors only led to positive surprises. Growth has been stronger and inflation weaker than it had forecast. The net result?

As Malhotra noted in his last policy statement after this month’s MPC meeting, we are experiencing a Goldilocks moment. This is no mean achievement. It comes in the backdrop of slowing global growth, with advanced countries like the UK and Japan stuck with low or negative growth and above-target inflation.

In fairness, though, some credit for India’s neither-too-hot-nor-cold scenario must be shared with three other entities: the government, which appears to have given him a free hand after its calls for monetary easing weeks before he took office, the institutional strength of RBI, and last but not least, the element of luck.

In a world of variable uncertainty and a variety of economic challenges, it matters more than we like to think. As Napoleon is said to have asked once, “I know he’s a good general, but is he lucky?” India needs Malhotra to not just be a good RBI governor, but a lucky one as well. We wish him all the best for the rest of his term in office.