MUMBAI: Days after Urjit Patel resigned 10 months before the end of his tenure as RBI Governor, the government has chosen Shaktikanta Das to head the central bank at a critical time.
The man who oversaw the implementation of demonetisation is the governments choice to be the new Governor of the RBI. He has his work cut out for him as the RBI and the government haven’t been on the best of terms; probably leading to Patel’s resignation though he cited personal reasons. The deputy director Viral Acharya remains in his post.
The past few months have been rough for the RBI. Its top brass, particularly deputy Acharya’s speech warning of any government interference in the functioning of the RBI was a stark moment that only escalated in the weeks since. Ratings agency Fitch warned of risks to policy priorities in the wake of Patel’s resignation.
In a news conference on Wednesday, Das said he would consult with the heads of state-run banks to resolve the ongoing problems that plague the banking sector. He said in part, “I will try to uphold professionalism, core values, credibility and the autonomy of the Reserve Bank as an institution”. His first order of business will be to oversee his first board meeting on Friday which will go ahead according to him.
Das is a bureaucrat by nature and most recently was appointed the Economic Affairs Secretary in early 2017. The 61-year-old is considered to be close to the current finance minister Arun Jaitley. He was the public face of the government for the demonetisation announcement and subsequent public interactions in defending the same policy as he’s seen as many to be media savvy. Going forward it will be interesting to see how the relationship between the central bank and the government goes.Could he be someone who can act as a mediator between the bank and the government? Perhaps, but its incumbent upon him to prevent any overt or covert government influence.
Speaking on the rift between the government and the central bank he said, “The government is not just a stakeholder, it also runs the economy and country. So, there has to be free, fair, objective and very frank discussions between the government and the RBI”.The banking sector is under considerable stress currently and Das will need to sort out issues such PFC and extending credit. On this he said “Banking is currently facing several challenges of critical importance that need to be dealt with. Several measures have been taken, but many more measures perhaps need to be taken”.
One BJP leader, Subramanian Swamy wasn’t happy with the choice calling it wrong. He said in part, “Shaktikanta Das being appointed as RBI Governor is wrong, he has worked closely in corrupt activities with P Chidambaram and even tried to save him in court cases.” The Livemint editorial states that the new Governor will have to use his bureaucrat background in his new role – “The appointment of Shaktikanta Das as the 25th governor of Reserve Bank of India (RBI) is both a symbol of continuity and a break from tradition. How will Das, the central banker, balance out the other persona, Das, the bureaucrat?”
Former finance minister P Chidambaram questioned the governments choice given Das is a staunch defender of the demonetisation policy and oversaw the implementation of the GST policy as well; both of which has come under criticism from many circles. He will need to demonstrate that he isn’t at the mercy of the government and stand up for the independence of the RBI and the following 3 years of his tenure will be a test given current circumstances.