Revenue Secretary Sanjay Malhotra’s surprise appointment as the Reserve Bank of India (RBI) Governor comes amid worries over a decline in economic growth, a weaker currency and an upturn in inflation. As he embarks on his three-year term, Malhotra has huge expectations to deliver, particularly concerning the monetary policy. Despite the several high points during his six years in office, the second longest for any chief of the central bank, Shaktikanta Das ends his tenure on a somber note. His parting message about restoring inflation-growth balance being the most important task ahead is acknowledgement of the unfinished agenda. Political overtones have been dominating the clamor for a cut in interest rates, with both the Finance Minister and Commerce Minister flagging high bank interest rates as a growth dampener.
Das leaves behind a legacy marked by steady policymaking and deft crisis management. He steered the economy through the Covid pandemic which prevented any economic activity for well over a year, and also oversaw its recovery, especially in the financial sector. Another achievement was to mend the difficult relationship between North Block and Mint Street that he had inherited from Urjit Patel. The generous out-of-record dividend to the Centre remains a contentious issue, raising concerns about weakening of the RBI’s financial strength and independence.
While strengthening the banking system, Das prevented a build-up of risk, asking lenders to avoid all forms of exuberance. The Governor-headed Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.5 per cent for the 11th consecutive time last week. It signaled the RBI’s cautious approach amid inflation and slowing growth. A review of the rate cut is likely by the Malhotra-headed MPC in its February meeting. It will be a tough call.
(Tribune, India)