After Shaktikanta Das, another finance ministry bureaucrat has been appointed as the governor of the Reserve Bank of India (RBI). Revenue Secretary Sanjay Malhotra will replace Das. Economists were speculating over the future of Das in the wake of data showing the South Asian economy expanded 5.4% from July to September, a seven-quarter low and far below the Reserve Bank of India’s 7% projection, Bloomberg reported.
When Shaktikanta Das joined the central bank six years ago, he had waded into a government-RBI rift. A deft bureaucrat like his predecessors Duvvuri Subbarao and YV Reddy, Das had a tough job: to clean the mess left by high-profile economists Raghuram Rajan and Urjit Patel whose tenure at the helm of the RBI was marked by spats with the government, erosion of confidence and high uncertainty.
Now, when expectations for a rate cut have spiked after a long rate pause and the GDP dip, Malhotra will be heading the Monetary Policy Committee (MPC) when it considers a rate cut in its February meeting.
Who is Sanjay Malhotra?
Malhotra, a seasoned bureaucrat, will be the 26th governor of the apex bank, succeeding Das, whose term is set to end Tuesday.
Malhotra, a 1990 Batch Rajasthan Cadre IAS Officer, will assume office n December 11, 2024 for a period of three years, the appointment committee of the cabinet said in a notification. Before becoming the revenue secretary in December 2022, Malhotra worked as an officer on special duty (OSD) in the revenue department.
Malhotra is an Engineering Graduate in Computer Science from the Indian Institute of Technology, Kanpur and has a Master’s in Public Policy from the Princeton University, USA.
With demonstrated leadership and excellence in his career of over 33 years, Malhotra has worked in multifarious sectors including power, finance and taxation, information technology, mines etc. Presently he is Secretary (Revenue) in Ministry of Finance. In his previous assignment, he held the post of Secretary in Department of Financial Services under the Ministry of Finance, Government of India.
He has extensive experience in finance and taxation at the state as well as the central government. As a part of his present assignment, he played an instrumental role in tax policy formulation in respect of direct and indirect taxes.
Last week, possibly aware of his impending appointment at the RBI, Malhotra asked revenue officials to exercise caution when issuing high-pitched demand notices to businesses and industries, asking them to keep the interest of the economy before the interest of the revenue.
“If in the process of garnering some small revenue, we are hurting the whole industry and economy of the country, that is certainly not the intent,” Malhotra said at the 67th annual day of the Directorate of Revenue Intelligence (DRI). “Revenue comes in only if there is some income and so we have to be very cautious that in the process, as they say, ‘do not kill the golden goose’,” Malhotra said.
What awaits Sanjay Malhotra at the RBI
Malhotra will take over the reins at the RBI amid worries over a slowdown, a weaker currency, sticky inflation, and huge expectations to deliver. The clamour for a rate cut is also rising. In its December meeting, the MPC kept the policy repo rate unchanged at 6.50% for the eleventh consecutive time. In April last year, the MPC stopped its rate-hike cycle by retaining the key lending rate at 6.5 per cent, after it had hiked rates six times in a row. The impact of those rate hikes was not believed to have percolated to the ground by then.
The MPC dashed the hopes for interest rate cut which had gone up as high interest rates were seen to be jeopardising economic growth. India’s gross domestic product (GDP) growth dipped to 5.4% in the second quarter of 2024-25, the lowest since the third quarter of 2022-23. It was a big drop from 8.1% growth in the same period last year and also from 6.7% in the previous quarter. However, CRR, or the percentage of deposits banks keep with the RBI, was reduced by 50 basis points to 4%, releasing a total of Rs 1.16 lakh crore into the banking system.
The RBI scaled down FY25 GDP growth projection by 60 basis points to 6.6% and raised the inflation projection upward as it acknowledged the growth-inflation trade-off has become adverse since the last policy. “Both inflation and growth have turned adverse since the last policy. Although we expect further alignment of inflation with our medium-term targets, the persistence of inflation impacts purchasing power and consumption,” Governor Das said.
Despite all the accolades and after running a steady ship, Das is completing his six eventful years in RBI on a sombre note. Malhotra will inherit missing inflation target, senior ministers stoking a simmering controversy over computation of inflation, RBI’s reluctance to spot a slowing growth and the regulator’s stern measures to diffuse loan bubbles worsening the consumption squeeze.
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