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Informist, Tuesday, Dec. 10, 2024

 

By Priyasmita Dutta and Sagar Sen

NEW DELHI - A new boss can often lead to nervousness and upheaval at any organisation. But when Sanjay Malhotra takes charge as the 26th governor of the Reserve Bank of India on Wednesday and occupies his chair on the 18th floor of the central bank's headquarters in Mumbai, the transition is likely to be how insiders describe the current revenue secretary: calm, efficient, and measured.

Monday, the government named Malhotra as the new RBI governor, ending months of speculation over who will sit in the hottest chair outside of New Delhi should Shaktikanta Das not get an extension. It is almost appropriate that the understated Malhotra's name was not even doing the rounds in the rumour mill along with those of other senior government officials.

According to a former senior bureaucrat who did not wish to be named, Malhotra is a "very diligent officer...who doesn't unnecessarily ruffle feathers. He does his work efficiently," the person said, highlighting his sincerity and hard-working nature.

Other words that mandarins from North Block use to describe Malhotra are "meticulous" and "solution-oriented".

"He is a meticulous officer who looks at every issue very closely," said Vivek Aggarwal, additional secretary in the revenue department. "He identifies the issues and looks at them from a solution perspective. He is always looking out for solutions."

Aggarwal's views are echoed by another department official who has worked closely with Malhotra. "He (Malhotra) is very practical and solution oriented. He is not a theory-believing, bookish person; all his suggestions were based on practicality...Very calm and collected. Never scolded or shouted."

The view from outside the finance ministry is not different. "In our interactions with him on goods and services tax and other tax related issues, he has always been proactive, hands-on, and solution oriented," said Pratik Jain, partner, PwC India.

BUREAUCRAT TO TECHNOCRAT
The template for Malhotra has seemingly been set by his predecessor Das, who took over at the RBI in December 2018 at a rather tumultuous time, with Urjit Patel citing personal reasons to resign from the governorship after two-and-a-half years at the helm of the central bank which saw a complete breakdown of relations between Mint Street and North Block. The difference, however, is that Das had already retired from the bureaucracy at the time of his appointment, while Malhotra still had a few years of service left. This perhaps makes him more like D. Subbarao, who made the move from New Delhi to Mumbai mid-way through his term as finance secretary in September 2008.

Writing in his book ‘Just a Mercenary?’, Subbarao said he was "denied credibility" in his early days as RBI governor because he was the first serving finance secretary to be appointed governor. "The general surmise was that the government was sending one of its trusted civil servants to the RBI so that he would do their bidding without making too much of a fuss about central bank autonomy," Subbarao wrote.

Malhotra is on a similar ground, with people in the know saying that he is a trusted aide of Finance Minister Nirmala Sitharaman and those further up the chain of command.

"He is a very capable person and extremely trusted by PMO (Prime Minister's Office) and FM (finance minister)," said a senior official from the tax industry who has interacted closely with Malhotra. "A very careful listener, he grasps the subject before speaking and thinks through what to say and what measures to say and never takes the limelight."

Malhotra's appointment comes at a time when pressure has been rising on the RBI to lower interest rates, with Sitharaman as well as Commerce Minister Piyush Goyal recently suggesting the same. Whether the new RBI chief will do so is anybody’s guess, with central bank watchers noting that bureaucrats often change when they become a part of the central bank.

"In the current regime, secretaries are not really accountable," said the former senior bureaucrat quoted above. "Their mandate is to follow what instructions are passed on to them by (the) political masters. In RBI, he (Malhotra) will have more autonomy."

THE MARKET AWAITS
The market, though, already thinks that with Das' exit, the RBI's Monetary Policy Committee has become less hawkish.

"The appointment of Mr Malhotra could set a new direction for the RBI," Shilan Shah, Capital Economics' deputy chief emerging markets economist, said in a note on Monday. Shah, who previously expected the MPC to only cut interest rates from April under Das' leadership, now sees a 25-basis-point repo rate cut at Malhotra's first meeting as head of the rate-setting panel on Feb. 5-7. Standard Chartered Bank's Anubhuti Sahay and Nagraj Kulkarni also think Malhotra's entry is "likely to increase market expectations of rate cuts in 2025, in terms of both quantity and timing."

Last week, the MPC left the repo rate unchanged at 6.50% for the 11th meeting in a row despite GDP growth sliding to a seven-quarter low of 5.40% in Jul-Sept. Inflation, however, remained Das and the committee's biggest concern, having jumped to a 14-month high of 6.21% in October.

Apart from the glamour of interest rates, Malhotra will have a lot more on his plate as RBI governor. According to Additional Secretary Aggarwal, Malhotra "never looked at the economy from a revenue perspective" but took a holistic view. And having spent time as secretary of the Department of Financial Services before becoming revenue secretary, he will be familiar with the challenges of the banking sector. He should be well-prepared, then.  End

 

Edited by Vandana Hingorani

 

 

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