The RBI head has easily mended Centre-RBI ties. Fixing the economy is proving more difficult.
High profile: The RBI governor at the India Today Conclave 2019 in Mumbai (Photo: Bandeep Singh)
Shaktikanta Das assumed office as the 25th governor of the Reserve Bank of India (RBI) at a time the central bank was the cynosure of all eyes, albeit for the wrong reasons. The previous governor, Urjit Patel, had locked horns with the central government on a host of issues, most importantly that of the RBI’s autonomy. With Patel’s acrimonious exit in December 2018, Das had his work cut out. Not only did he have to quickly mend the RBI’s relations with the Centre, he also had to do whatever possible to bring the tottering Indian economy back from the brink. The former task wasn’t as tough as the latter-after all, as secretary in the department of economic affairs, Das had shadowed his then boss, former finance minister Arun Jaitley, in public appearances to explain and justify demonetisation. But rescuing the Indian economy has proved a more formidable challenge. Growth was suffering, and the impact of demonetisation and a poorly implemented Goods and Services Tax (GST) were visibly taking their toll. It surprised no one, then, that the RBI’s monetary policy committee (MPC) went on to repeatedly cut interest rates in consecutive meetings through 2019, slashing rates by a total of 135 basis points by early December. But these moves have not helped much. A slowdown in consumption, among other factors, pulled GDP growth down to a six-year low of 4.5 per cent for the second quarter of 2019-20. Now, Das has a new challenge before him, in the form of rising inflation. Retail inflation rose to an over three-year high of 5.5 per cent in November 2019, triggered by a rise in food prices, especially onions. The MPC maintained status quo on rates in its meeting early December, and if it chooses to do so again, it could affect growth. Das also came to the government’s aid this year, transferring Rs 1.76 lakh crore to the latter as per the recommendations of a panel led by former RBI governor Bimal Jalan, including a Rs 1.23 lakh crore surplus for 2018-19. To improve lending, Das has also moved to take a few public sector banks out of the prompt corrective action framework. However, he will have to continue battling the vast volume of non-performing assets at public sector banks (around Rs 8 lakh crore as on March 2019) while restoring the ailing non-banking financial companies back to health.