Shaktikanta Das, the outgoing governor of the Reserve Bank of India (RBI), mentioned that the main job for the RBI is to balance inflation and economic growth. He led the RBI during tough times like the pandemic and rising prices, which affected India’s economy. A career bureaucrat with extensive experience, Das was appointed governor in December 2018 by Prime Minister Narendra Modi.
On December 9, the government selected revenue secretary Sanjay Malhotra as the new governor, surprising many who expected Das to get another term. When Das started his role, tensions existed between the government and the RBI. However, Das improved how they worked together, making it easier for the two to communicate.
Central banks like the RBI control prices mainly by changing interest rates. Sometimes, this can slow down economic growth. Governments often try to speed up economic growth, making the central bank’s job challenging. As former Federal Reserve chair Ben Bernanke observed, this balance is not easy.
Das was careful about managing inflation. For 11 straight meetings, the RBI kept the interest rate unchanged at 6.5%, after raising it by 2.5% in the previous months. This concerned the government since higher interest rates can hurt economic growth. Commerce Minister Piyush Goyal suggested that the RBI should lower interest rates to boost growth. He criticized the idea that food prices should influence interest rates. Finance Minister Nirmala Sitharaman agreed, saying banks needed to make interest rates more affordable for businesses.
Despite pressures to lower rates, Das was cautious, advising lenders to avoid risky behaviors. He noted that many factors affect growth, not just the interest rate. After the latest policy meeting, he emphasized the importance of making smart monetary policies based on current conditions.
Das also played a crucial role in stabilizing the economy after the pandemic and improving relations between the government and the RBI. He remained dedicated to his duties even when he contracted Covid-19, working from home throughout his recovery.
Sanjay Malhotra takes over during a challenging time, as economic growth has slowed to 5.4%, the slowest in seven quarters, and inflation has climbed above the RBI’s 6% limit for the first time in over a year. The new governor now faces the challenge of balancing inflation and growth.
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