The April 2025 Consumer Price Index (CPI) figure of 3.16% stopped me in my tracks. It’s the lowest since July 2019, down from 3.34% in March, driven by a sharp cooldown in food prices. With vegetable prices tumbling 11% year-on-year and food inflation dropping to 1.78%, this benign print lands squarely in the Reserve Bank of India’s (RBI) sweet spot—below its 4% target. For Sanjay Malhotra, the RBI’s new Governor, who took the reins from Shaktikanta Das in December 2024, this is a golden moment to shape monetary policy. But with monsoon uncertainties and global headwinds on the horizon, will Malhotra seize the day or play it safe?
The April numbers are a triumph of sorts. Food, which makes up nearly half the CPI basket, has been tamed for now. Vegetable prices, often the wild card in India’s inflation story, fell 11%, a steeper drop than March’s 7.04%. Cereal inflation eased to 5.35% from 5.93%, and pulses, a staple for millions, saw a 5.23% price decline. For a country where food price spikes can erode household budgets and fuel public discontent, this is a rare reprieve. The headline inflation rate, now at a 69-month low, sits comfortably within the RBI’s 2-6% tolerance band, giving Malhotra a chance to flex his policy chops early in his three-year term.
But dig deeper, and the picture gets murkier.
Malhotra’s approach remains an enigma. Unlike his predecessor Das, who was vocal about keeping inflation on a “tight leash,” Malhotra has been tight-lipped on monetary policy. His tenure as Revenue Secretary showcased a growth-oriented mindset—he pushed for tax simplification to spur investment and cautioned against overzealous tax demands that could choke businesses. Sources describe him as a consensus builder, adept at aligning fiscal and monetary goals, which could smooth tensions between the RBI and the government. But with inflation spiking to a 14-month high of 6.21% in October 2024 under Das, and economic growth dipping to 5.4% in Q2 FY25, Malhotra faces a tricky balancing act.
The RBI will be wary of the vegetable-driven dip, knowing food prices are notoriously volatile. Unseasonal rains in South India and heatwaves in the North could nudge vegetable prices higher by late May, as Nayar warns. The monsoon, while promising, is no sure bet—uneven rainfall could disrupt crop yields, reigniting food inflation. Globally, trade tariffs and oil price shocks loom as risks, especially with U.S. policy shifts under President-elect Donald Trump. Sabnavis suggests Malhotra might wait until August 2025, leveraging base effects that could keep inflation low in May and June, to assess these variables.
My take? Malhotra has a window to act, but he’ll need to tread carefully. A 25-basis-point cut in June would signal confidence without rocking the boat, especially with inflation trending below 4%. His data-driven approach, honed at IIT Kanpur and Princeton, suggests he’ll lean on numbers, not sentiment. But the RBI’s cautious DNA, combined with Malhotra’s newness to the role, might temper bold moves. Coordinating with Finance Minister Nirmala Sitharaman, a known ally, could pave the way for synchronized fiscal and monetary stimulus—a rarity in India’s economic history.
For now, India’s consumers are catching a break, and Malhotra has a chance to cement his legacy early. Whether he swings for growth or holds the line on inflation will define his tenure. As the monsoon clouds gather and global markets brace for turbulence, all eyes are on Mint Street.