Choose Your Own (Economic) Adventure

Dear Insighter,

Life is a poorly written choose-your-own-adventure book. You flip to Page 23 for “rate cuts,” but the plot twists into a tariff war. Turn to Page 45 for “private capex,” and it’s crossed out with “see: global fragmentation.” This week, the RBI and the world economy seemed to share the same ghostwriter, one with a flair for chaos and a weakness for acronyms.

Take Poonam Gupta, the RBI’s new Deputy Governor, who’s been handed a manual titled How to Redesign a Liquidity Framework Midflight. Her task? Convert the RBI’s “alphabet soup”—LAF, SDF, MSF—into coherent policy. Think of her as a DJ remixing a track while the crowd’s already dancing. Governor Sanjay Malhotra wants surplus liquidity at 1% of NDTL to prod banks into cutting rates faster. But with call market volumes shrinking and WACR’s relevance waning, Gupta must answer the existential question: What’s the RBI’s true north—a rate, a ratio, or raw instinct? 

Meanwhile, Saugata Bhattacharya, the MPC member with a surgeon’s precision for rate policy, is sharpening his scalpel. RBI models now chart a path for the repo rate to ease to 5.1-5.7%—a corridor as plotted with an engineer’s precision, yet fraught with the friction of real-world variables. “Ample room,” he asserts, pointing to inflation’s retreat toward the 4% target and a global economy gasping for stimulus. But beneath the optimism is a caveat: a weaker rupee, while theoretically sweetening exports, risks souring the recipe altogether. For Bhattacharya, it’s a nuanced calculus, one where even “ample” space demands measured steps. Watch his take or read the fine print.

The RBI isn’t just cutting rates, it’s flooding the system with liquidity. But as this BasisPoint Groupthink column notes, this liquidity blitz may mask deeper tremors: slowing money supply, limp credit growth, and GDP forecasts slipping to 6.4%. Is this caution or desperation? asks Vivek Kumar.

Outside India’s policy bubble, Donald Trump’s tariff tantrums continue to rewrite trade rules. This week also marks his first 100 days in office. In that time, he’s moved swiftly on immigration, border security, and a radical downsizing of the federal workforce, alongside the infamous reciprocal tariffs. 

Dr. Nilanjan Banik likens Trump’s “wall-building” to China’s “bridge-building,” a clash of 18th-century mercantilism and 21st-century ambition. Meanwhile, Yanis Varoufakis argues Trump’s chaos is a gift to “technolords” betting on crypto and AI deregulation. The takeaway? Trump isn’t just reshaping trade; he’s testing how fast institutions bend to unilateral power. 

On the other hand, gold is having a moment—part security blanket, part speculator’s daydream. Prices have leapt over 60% in a year, with Manoj Rane calling it a hedge against “geopolitical fractures” and R Gurumurthy cautioning a bubble inflated by “fear and RBI’s tightened loan norms.” Is gold the new crypto? Or just the oldest panic button? Glitter or grit?

Corporate India isn’t sitting still either. The next logical step for Mahindra, writes Krishnadevan V, could be the merger of SML Isuzu and Swaraj Engines, which would birth a rural logistics titan. Meanwhile, Reliance pivots from “efficiency to intimacy” as Jio and Retail face churn. 

Vedanta’s metals boom contrasts with its energy woes, and Varun Beverages fends off Campa Cola’s price wars for now. Dev Chandrashekhar breaks it down in his analyses. Bajaj Finance? The NBFC giant is sprinting on a track greased by expectations, observes Richard Fargose. 

Amid the noise, TK Arun spotlights carbon removal’s quiet revolution of turning CO2 into cash, and Gurumurthy warns of “entropy” in financial systems, where one algorithmic hiccup could trigger a system-wide chaos. It’s a reminder: control is illusion. Preparation is poetry. 

Also Read

• Offscript Weekly: Of ‘Insaniyat’, Pilgrims Progress & Some Data Magic by Ranjana Chauhan. Peek behind the headlines.
  
• Pope Francis and the Soul of Economics by Antara Haldar. 

Life, like RBI policy, is a series of calculated improvisations. So keep your gold close and your disaster plans battle-tested, in case the metaphors start getting too real.

Until next week, signing off from the edge of entropy,
Yours truly,
Phynix