India's new central bank governor Sanjay Malhotra sparks controversy with his appointment
- Sanjay Malhotra has been appointed as the new governor of the Reserve Bank of India.
- He will take over from Shaktikanta Das, who faced scrutiny during his tenure amid high inflation.
- Malhotra's leadership comes at a critical time as India grapples with rising inflation and seeks to maintain economic growth.
India has undergone a significant leadership change in its central banking system as Sanjay Malhotra, who previously served as Revenue Secretary, has been appointed as the new governor of the Reserve Bank of India (RBI) for a term of three years. This transition comes at a pivotal moment for the country's economy. Malhotra's appointment follows the tenure of outgoing Governor Shaktikanta Das, who played a vital role during his six years at the RBI, particularly noted for managing the economic fallout from the Covid-19 pandemic and overseeing India's controversial demonetization initiative in 2016. Das had faced criticism regarding his approach to interest rate hikes during high inflation periods but was still viewed as an integral figure in stabilizing the RBI's relationship with the Indian government. The new governor inherits several challenges, notably rising inflation which reached a 14-month high of 6.21% in October, surpassing the RBI's target of 4% and the allowable tolerance threshold of 6%. The central bank recently opted to maintain its interest rate at 6.5%, raising concerns among market observers about the potential implications for economic growth that is already facing pressures. Despite the RBI's restrictive actions, there is a pressing need to foster growth while simultaneously containing inflation. The IMF's forecast for India is a 7% economic growth for the year, though recent trends indicate a slowdown, as evident from the 5.4% growth recorded in the July-September quarter. Malhotra steps into this role with the task of navigating these economic challenges while addressing ongoing calls from the government to relax guidelines governing state-controlled banks. These guidelines, known as the prompt corrective action (PCA) framework, aim to monitor and intervene in the financial health of weaker banks and may require Malhotra's attention as part of his mission to balance regulatory oversight with economic growth aspirations.