A celebration of change seems to have replaced a craving for continuity. Apparently, if the choice is correct, change is not feared and can be more welcoming. The appointment of revenue secretary Sanjay Malhotra as the next governor of the Reserve Bank of India (RBI) appears to have gone down well with the industry, especially those from the Indian banking and financial services arena. While many have hailed Shaktikanta Das, the current RBI governor, who demits office on Tuesday, December 10th, the width and breadth of experience that the Malhotra brings with him seems to have comforted many.
Piramal Group chairman Ajay Piramal, a leading face of the Indian financial services with business interests also in pharmaceuticals and real estate, while congratulating Shaktikanta Das “for his deft handling of the monetary policy over the past six years through multiple challenges ranging from pandemic to prices, growth imperatives and geo-political risks,” says, “I am sure we will see an equally stellar leadership with Sanjay Malhotra at the helm as he comes with deep understanding of government finances, credit markets and technological advancements.” In particular, Piramal, refers to Malhotra’s “wide breadth of experience across establishments like the REC (Rural Electrification Corporation), DFS (Department of Financial Services) and Ministry of Power.” All of these, he feels, “makes him an impeccable choice as India’s next central bank governor.”
Another leading industrialist from South, who did not wish to be named, describes Malhotra as “an outstanding choice” and having known him as “a clear thinker, always objective and with a clear understanding of the financial system.”
Balancing Growth & Inflation
A leading economist and banker, who knows Malhotra but also did not wish to be named, sees in the new governor not only a leader with a “brilliant academic record but one who is level-headed and balanced.”
On the priorities for the new RBI governor, he and some of the other experts concurs with Das, who in a press conference on Tuesday, pointed to striking a balance between growth and inflation as a key priority that has been engaging the central bank. This is because the growth at 5.4 per cent last quarter was “quite disturbing” at a seven quarter low and inflation high at over 6 per cent and still an area of concern. To quote one of the experts: “all eyes will now be on how the RBI will calibrate the monetary policy at this delicate juncture.” If the focus is on inflation management and the interest rates are kept high, it could hurt growth. But, if the aim is to stimulate growth by reducing the interest rate, it could fan inflationary conditions even further.
To deal with this, there is apparently no magic mantra and the RBI will need to look at the inflation projection and factors driving and inhibiting growth – high interest rates or lack of demand. All of these, along with the fiscal stance of the government apart from the exchange rate.