New Challenges for New RBI Governor
By : Falaknaaz Syed
Update: 2024-12-10 19:18 GMT
The new year 2025 is going to see a new and very different MPC composition with three newly appointed external MPC members in October 2024, being now joined by the new governor and possibly a new deputy governor in January 2025 with deputy governor Michael Patra's tenure getting over.
The government has appointed Revenue Secretary Sanjay Malhotra appointed as the new Reserve Bank of India governor from Dec 11 2024 for a three-year term. Interestingly, the new governor and MPC will also have very different policy challenges and macro and global landscape entering CY25 vs what the outgoing governor Shaktikanta Das led regime faced at the beginning of CY24.
Says Madhavi Arora, lead economist at Emkay “The policy trade-offs are getting acute. Entrenched state of India's stagflation, tricky timings and small window of conventional rate cuts as global dynamics turn more fluid, mounting forex pressures and increasing cost of forex intervention, none of these were challenging in the same period last year.”
“As of now, we do not rule out a cut in Feb'25 at present, but would be more comfortable taking a firm call closer to the policy window. We also keep a watch on unconventional easing measures, specifically, the gradual easing of regulatory lending norms ahead in order to re-spur waning credit offtake,” added Arora.
Says Madhavi Arora, lead economist at Emkay “The policy trade-offs are getting acute. Entrenched state of India's stagflation, tricky timings and small window of conventional rate cuts as global dynamics turn more fluid, mounting forex pressures and increasing cost of forex intervention, none of these were challenging in the same period last year.”
“As of now, we do not rule out a cut in Feb'25 at present, but would be more comfortable taking a firm call closer to the policy window. We also keep a watch on unconventional easing measures, specifically, the gradual easing of regulatory lending norms ahead in order to re-spur waning credit offtake,” added Arora.
In his bureaucratic career of 33 years, Malhotra has served in sectors spanning power, finance, taxation, IT and mining. He is a '90 batch IAS officer, with an engineering degree in computer science from IIT Kanpur and a Master's in Public Policy from Princeton. Prior to his appointment as Revenue Secretary, he was Secretary in the Department of Financial Services (DFS), and other prominent prior roles include CMD of REC and ex-officio Secretary to the GST Council. His appointment indicates the government’s comfort with having a bureaucrat rather than a technocrat at the RBI's helm. He has taken tough taxation decisions relating to capital markets-changes/harmonization in capital gains tax treatment across asset classes, with removal of indexation for real estate and and debt mutual fund gains, were done during his tenure as Revenue Secretary.
However, recently he has taken cognizance of the negative impact of excessive tax compliance/notices on business activity.