India compounds new central bank boss’s challenges

REC

10/12/2024 04:30

(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
    By Shritama Bose
       MUMBAI, Dec 10 (Reuters Breakingviews) - India will have
a new central bank boss this week, against market expectations.
New Delhi appointed senior bureaucrat Sanjay Malhotra to the
role on Monday, a day before the end of incumbent Shaktikanta
Das’ term, defying speculation that he would get a second
extension. The last-minute decision further complicates the
newcomer’s thorny brief. 
    Malhotra is taking the reins at the Reserve Bank of India at
a tricky moment. Growth is stalling in the world’s fifth-largest
economy. He'll have to juggle the slowdown while trying to keep
inflation within a target of 2-6%. And he'll have to do so amid
rising global tensions such as wars in the Middle East and
Ukraine, and Donald Trump’s imminent return to the White House.
    The U.S. president-elect has threatened BRICS nations with a
100% tariff rate if they challenge dollar supremacy. That
jeopardises RBI’s project of increasing trade settlements in the
Indian currency. A strong dollar weighing on the rupee makes the
central bank’s job harder, especially as India has been on and
off the U.S. list of currency manipulators since 2018.  
    The 26th RBI governor’s profile ought to give some comfort.
As the top taxman, he oversaw a revamp of India’s capital gains
levies earlier this year. He also led state-backed lender REC
 RECM.NS , which finances energy projects, for 15 months until
February 2022.
    The choice of a second straight bureaucrat, rather than an
academic or independent economist, also might suggest Prime
Minister Narendra Modi's administration is aiming for some
stability at the central bank. After all, in addition to Das,
his deputy, who leads the monetary policy department, is likely
to leave in January. And in October, new appointees took over
the three seats on the rate-setting committee assigned to
outsiders.
    Trouble is, Malhotra’s views on monetary policy are unknown.
His current stint at the finance ministry may suggest he's close
to the government, which waited until the 11th hour of Das' term
- and until just after an interest rate decision that didn't go
its way. Such a messy handling of the succession at a key
institution like the central bank is far from ideal.
        Still, markets initially regarded Das as a yes-man when
he started in 2018. That dissipated over his six-year tenure.
The way Malhotra was installed means he will have to add
overcoming a similar assumption to his long list of challenges.
    Follow @ShritamaBose on X

    CONTEXT NEWS
    India appointed career bureaucrat Sanjay Malhotra as its new
central bank governor on Dec. 9 in a surprise move. He succeeds
Shaktikanta Das, the longest-serving Reserve Bank of India chief
since the 1950s, on Dec. 11.
    Currently revenue secretary to the finance ministry,
Malhotra has worked in financial services, power, taxation and
information technology during his three-decade career. 

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Graphic: Price control is the RBI's biggest challenge    https://reut.rs/4isYOSc
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 (Editing by Antony Currie and Ujjaini Dutta)
 ((For previous columns by the author, Reuters customers can
click on  BOSE/ 
shritama.bose@thomsonreuters.com))