The brand new Governor of the Reserve Bank of India, Shaktikanta Das, may actually be a more successful one than his illustrious predecessors. It should be common knowledge that a scholar is a reluctant student and often tries to impose himself and his thoughts on others. With an erudite board to discuss matters without any preconceived notions, the retired bureaucrat may bring the best out of his team that actually run the RBI. This may be the time that we should be positive about a choice by the Narendra Modi government who probably did the mistake of relying too much on the western educated economists rather than a team captain who has the necessary skills and wisdom to carry along with him the responsibility reposed on him by a great nation — a nation which is on the threshold of scaling newer heights.
The media — both new and conventional, with a few exceptions — is looking for one accusation albeit without any substantial evidence to cry foul. The mills churn out stories and commentaries about how the Modi Government is planning a “raid” on the coffers of the Reserve Bank. Alas! These folks are not ignorant about the fact that there is a Monetary Policy Committee that was set up who will have the responsibility of fixing interest rates! Had the government intended to raid, there is no need for an MPC, all they needed was to invoke S. 7 of the RBI Act.
This does not mean that Das will have an easy tenure. The recent elections have thrown up a question as to what the people of India want, and it certainly is not “Sabka Saat Sabka Vikas”. They are only bothered about the farm loan waiver and petrol/diesel prices. What it does to the economy is not his problem. Here is where the balancing act of the RBI will be tested.
The exit of Urjit Patel has given the opportunity to the Modi haters to criticise and create a doubt in the minds of the public that the Government is at fault. Known for his poor communication skills, Dr. Patel has ruined many businesses. The Bandhan Bank story is just one.
Das is starting on a clean slate. He will have to strive to walk that extra step to reach out to his biggest stake holder, the government. His relationship with the Finance Ministry holds the key and the positive sign about his arrival is evident from the fact that the Stock Exchange did not give a damn about the Patel Exit. The businessmen are optimistic and so are the investors. The skills of an administrator and a diplomat is now required now for the smooth working of RBI and the government.
There is no deficit in talent within the RBI and if one feels that it is the governor who is the only player in the institution, it should not be believed. RBI, unlike the judiciary is not an independent and is certainly answerable and accountable to the government and the Parliament. Hence, who else will know better than a bureaucrat with impeccable career record.
The challenges ahead are not just the relationship management, though this is the most important one right now. He will have to take an unbiased and studied stand on the relaxation that is being demanded by the banks who are burdened with bad loans disbursed during the previous government. This will make the government look for support from the Central Bank to improve liquidity in the banking sector. This is the only way to drive the consumption and give fillip to the economy who has made significant structural corrections under the Modi government.
We may not see any major policy changes. The economy is doing well, and all it needs is a support and careful handling of the resources. The “hawkish” demeanour by the previous governors did not support the banking system and one may not expect Das to be “dovish”. He has to use his administrative and decision making skill to bring about a refreshing change in the attitude of the Reserve Bank.
The possibility is that we will actually see a great innings, if not scintillating one from Shaktikanta Das. If you actually are a true nationalist, you will certainly like to see him successful.
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