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Informist, Wednesday, Dec. 11, 2024

NEW DELHI – New Reserve Bank of India Governor Sanjay Malhotra on Wednesday highlighted the importance of policy continuity, terming it as "very, very important". Addressing reporters at the central bank's headquarters on his first day as governor, Malhotra stressed the need to maintain growth to ensure India becomes a developed nation by 2047.

"Stability in policy is very, very important. This is something even in my previous role we were trying--to give stability and continuity in policy. Whether its taxation policy, or fiscal policy, or monetary policy, I think all businesses, all people, they do need continuity and stability rather than a day-to-day kind of policy," Malhotra said.

Malhotra, a career bureaucrat, was on Monday appointed as RBI governor, succeeding Shaktikanta Das. He last served as the revenue secretary in the Ministry of Finance, prior to which he was the secretary of the Department of Financial Services. Calling the RBI an "august" and "prestigious" institution, Malhotra said it has a "huge legacy" and had done "some very commendable work" over the years.

"So I will continue to uphold the legacy and take it forward," he added.

GROWTH, INFLATION?

While he praised the RBI's track record in managing monetary policy and financial inclusion, among other aspects, he said "we need to be conscious that we do not have the monopoly of all knowledge. Knowledge, information, expertise is available outside as well, whether internationally or nationally". Malhotra said RBI would continue to hold consultations so that the functions and objectives entrusted with the central bank are carried forward.

Interestingly, Malhotra did not utter the word 'inflation' at all in his near-15-minute-long address, although he did mention monetary policy management as a function of the RBI. However, he did say that the Indian economy is one "which needs to develop as we are entering Amrit Kaal and to realise the vision of Viksit Bharat in 2047... the huge responsibility that we have in ensuring that the growth that this country actually has, that continues."

Malhotra's appointment and Das' exit from the Monetary Policy Committee has raised expectations of an interest rate cut at the next meeting of the committee in early February. Last week, the MPC left the repo rate unchanged at 6.50% for the 11th meeting in a row, with Das warning that "price stability is essential for sustained growth"--although he admitted that a growth slowdown, should it linger "beyond a point", may need "policy support".

Malhotra takes over as RBI governor and head of the MPC amid rising pressure to reduce interest rates, with GDP growth having slid to a seven-quarter low of 5.4% in Jul-Sept while headline retail inflation was above the 6% upper-bound of the flexible inflation target in October. The RBI on Dec. 6 cut its GDP growth forecast for 2024-25 (Apr-Mar) by 60 basis points to 6.6%.

Malhotra also made note of the global geopolitical tensions, the impact of climate change, and political uncertainties around the world. "As with other organisations... we have to be conscious of the fact that while we do maintain continuity and stability, we cannot be stuck to it, and we have to be alert and agile to meet these challenges while we maintain policy continuity".

On the financial sector, Malhotra stressed on collaborating with other regulators and the central and state governments so that the benefits of formal financial inclusion reach everyone. The former revenue secretary also said technology would be further used to reduce costs and to make financial inclusion more accessible and all-pervasive. "For this, innovation will be key. And while innovation will have to be fostered, (it) will have to be supported, we will also have to be conscious of the risks that it may entail. So putting in place the requisite safeguards and guardrails... Without killing or stopping innovation, we will work towards further use of technology."

QUESTIONS LATER

Continuing with the cricket analogies favoured by his predecessor, Malhotra said it would not be appropriate for him to answer detailed questions on his first day.

"It's my first day and so if I start playing my shots from Day 1, from ball one, I don't think it will be appropriate on my part. And as I mentioned to a few others yesterday in Delhi, I would first like to see and I would like to understand the various issues, discuss with my officers, the DGs (deputy governors), EDs (executive directors), get into the grips of all the various issues that RBI is supposed to be looking into and then come back to you whenever it is required."

While he declined to face "bouncers, googlies, and yorkers" from reporters, he said "half-volleys and practice balls we can perhaps discuss over tea".  End

Reported by Siddharth Upasani

Edited by Saji George Titus

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