Former Federal Reserve Chairman Ben Bernanke has a nickname: 'Helicopter Ben.'

It was not because he was flying helicopters for a hobby, but that he'd throw money from helicopters to fight an economic depression when zero percent interest rates aren't helping, a metaphor that economist Milton Friedman first used.

It is in a way expressing the power of liquidity to drive demand in an economy - something he delivered as Fed Chair after the Lehman Brothers collapsed in 2008. He used liquidity as a tool to move the economy more than anyone else had ever done before.

On Friday, when the popular demand from the Reserve Bank of India's Monetary Policy Committee was a repo rate cut, Governor Shaktikanta Das delivered a cut in the Cash Reserve Ratio, the proportion of deposits that banks need to keep with the RBI without earning any interest.

Bringing CRR down by 50 basis points to 4% would release as much as ₹1.16 lakh crore to the banking system that has anyway been scrambling for deposits.

One common complaint during times of rising interest rates or in an easing cycle has been - transmission - the effect of interest rate action by the RBI on market rates. That was always a factor of liquidity in the market rather than the repo rate where RBI lends banks with government bonds as collateral to a limited amount.

Often, liquidity in the system is influenced by so many factors such as people's need for currency, the inflow and outflow due to foreign portfolio investors and government spending. This would lead to a fall or a spike in market rates above what the central bank would like to be.

In these circumstances when the RBI is selling dollars sucking out the rupee and inflation above the upper tolerance band of 6%, there is little RBI could do to address the demand for lower borrowing costs. The unseen, but more effective way is the CRR cut.

"Challenges around timing and window of conventional rate cuts, and FX cost of rate cuts, a CRR cut was the least-costly measure for the RBI,'' said Madhavi Arora, an economist at Emkay Global Financial. "While liquidity infusion gives some cushion when core liquidity may steadily move to a deficit, this could lead to better and immediate transmission of rate cuts.''

Governor Das who has been vocal about taming inflation to bring it to the mandated 4% target, brought in the need to address the slowing economic growth, albeit with a caveat.

"The MPC remains committed to restoring the inflation growth balance in the overall interest of the economy,'' which he said has been 'unsettled.' "At present, it is necessary to draw on the flexibility provided by the neutral stance to wait for and monitor the incoming data for confirmation of the decline in inflation.''

The two factors that the central bank was looking to balance - growth and inflation - their forecasts have moved in opposite directions. While growth has been reduced by 60 basis points, inflation has been bumped up. The forecast of 4% inflation in the second quarter of the next fiscal year is probably a sign of a rate cut cycle, however shallow it may be. Remember, for the inflation-targeting central bank, it need not come to the target, but a forecast of it is enough.