Several hits, a few misses for RBI as Shaktikanta Das completes one year

Autonomy of the Reserve Bank of India (RBI) is “intact” even as the Governor Shaktikanta Das completes one year in office. He assumed office amid strong opposition from several corners that feared that the central bank will lose its autonomy. The former economic affairs secretary took over after former RBI Governor after Urjit Patel abruptly quit on December 10 last year, citing interference from the government. Patel was hailed as a man who fought to maintain the autonomy of the central bank.

Das, who at that point, was serving as Sherpa to the G-20 and also as a member of the Fifteenth Finance Commission was perceived to be “close” to the BJP and the NDA-I government. After all he was the man who had steered the economy during the demonetisation period and even defended the government’s move. There was widespread criticism after he assumed office.

As Das took charge, Congress leader and former finance minister P Chidambaram tweeted, “Government has appointed two persons who vocally supported demonetisation to two key posts. What does it say about the Modi government?  Is government telling the people of the country ‘we don’t care what you think, we will do exactly as we please’?” BJP’s Subramanian Swamy too had opposed Das’ appointment. There was scepticism and many even predicted the end of RBI’s autonomy. If that was not enough. Das’ educational qualification – he holds a Master’s degree in History– also came under the scanner.

Das, as many of us know him, is a man whose eyes are foxed on economic growth. The repo rate—the rate at which banks borrow from RBI—has come down by 135 basis points since February last year. Many have seen this as Das’ giveaway to the government.

However, equally important is the fact that under Das India’s growth projections have been drastically slashed. After slashing repo rate for five consecutive monetary policy reviews, the RBI decided to hold the rates in its last meeting.

After RBI transferred a whopping Rs 1.76 lakh crore to the government in August this year, once again there were doubts whether the central bank had become an extension of the government. After all, what many did not understand is the fact that this sum is just a one-time transfer and that a committee under former RBI Governor Bimal Jalan had prescribed the measure.    

Immediately after his appointment, Das held several meetings with the stakeholders including bankers, economists and even representatives of the micro, small and medium enterprises. His colleagues say that he is a man who is democratic and transparent in his working style. “He knows how to take people along, seeks their opinion, makes them feel comfortable and this is an important quality, which Patel lacked…Patel would not talk much and that was a drawback,” says an insider.    

Das, who has a mind of his own, knows the importance of holding this position. He is affable but knows his job. In fact he will be even more cautious as he knows the added scrutiny that is attached on his functioning. While he does the same things that his predecessors, his style is different. Das does not believe in openly being at loggerheads with the government. He knows the importance of being diplomatic on open forums – especially when he is representing India outside home. “When you go outside India, you know you need to be a diplomat and it does not reflect well if you criticise the government, it damages the image of the country—this is something he (Das) knows well and follows,” another colleague of his says.

However, the RBI has also come under severe criticism for handling the Punjab & Maharashtra Co-operative (PMC) Bank case. The opposition parties have blamed the central bank for its failure to detect a problem of such a large scale at an appropriate time. More so, RBI imposed withdrawal limits for PMC Bank customers, which drew the wrath of the public at large.

While Das is in the middle of the crease at a rather difficult time with economic growth slowing to 4.5% in the second quarter of the current financial year, his moves will be critically watched and analysed. The jury is still out on Shaktikanta Das.

Mahua Venkatesh
Mahua Venkatesh
Mahua Venkatesh has over 20 years of experience as a business journalist. Over these years she has been writing on economy, business and finance. She has been in senior editorial roles at Hindustan Times, The Financial Express and ThePrint among several other leading media organisations of India.

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