Best of BS Opinion: RBI's policy caution amid global and domestic pressures

Here are the best of Business Standard's opinion pieces for today

The RBI’s Monetary Policy Committee has chosen caution, holding the repo rate amid global uncertainty, even as inflation readings remain relatively soft. The temporary easing of tensions in West Asia following a US-Iran ceasefire has stabilised markets and cooled oil prices, but the situation remains fragile. Our first editorial notes that the RBI’s projections of 6.9 per cent GDP growth and 4.6 per cent inflation for FY27 reflect these risks, alongside concerns over a weaker monsoon. Its move to publish core inflation estimates and streamline regulatory directions signals an effort to improve transparency while maintaining policy flexibility. 

Meanwhile, the proposed amendments to the Foreign Contribution (Regulation) Act have triggered concerns over expanding state control, especially with provisions allowing a government authority to take over or dispose of NGO assets. This builds on a decade of tightening regulation, which has already seen tens of thousands of licences cancelled or lapse. While the government frames the changes as necessary to safeguard national interest, the lack of clear definitions raises the risk of arbitrary action. Our second editorial argues that such measures could weaken organisations delivering essential services, particularly where state capacity is limited. 

 

M Govinda Rao writes that India’s current economic stability may not hold if the West Asia conflict persists. Rising oil prices could push India towards stagflation, with estimates suggesting a $20 increase per barrel could cut growth and raise inflation by up to 1 percentage point each. Early stress is visible in weakening manufacturing and fiscal strain from fuel tax cuts. With forex reserves under pressure and the rupee depreciating, the government’s room to respond is limited. Rao argues that elevated deficits and low household savings further constrain policy choices, making fiscal correction and structural reform more urgent. 

Kanika Datta notes that while India has improved its crisis response mechanisms, it has failed to translate these into long-term reforms. The Covid-19 experience highlighted persistent gaps in public healthcare, despite an effective vaccine rollout. Similar patterns are visible in energy and agriculture, where short-term fixes dominate. The current crisis exposes structural weaknesses like limited energy storage and fertiliser vulnerabilities that remain unaddressed. Datta notes that without sustained policy shifts, India risks repeating cycles of reactive governance. 

Finally, Shyam Saran reviews Edward Fishman’s Chokepoints, a book that highlights how economic and technological leverage has become central to global power. Control over financial systems and supply chains allows countries to exert influence without direct conflict, though such tools have limits. Cases like Iran and Russia show resilience against sanctions, while technological restrictions on China mark a new front. India’s balancing approach underscores the complexity of navigating this landscape, where economic coercion and traditional conflict now operate simultaneously. 

Stay tuned!