(Bloomberg) -- India appointed career bureaucrat Sanjay Malhotra as the new governor of the nation’s central bank, ending weeks of speculation over who would helm monetary policy in the world’s fastest-growing major economy.
The new governor, who has a master’s degree in public policy from Princeton University, will take charge of the Reserve Bank of India for a three-year term from Dec. 11, according to a government statement on Monday. He succeeds Shaktikanta Das, who has been the RBI chief since 2018.
Malhotra, currently serving as revenue secretary in the Ministry of Finance, has more than three decades of experience in public policy, with expertise in areas such as power, finance and taxation.
While his views on monetary policy are largely unknown, Malhotra has often pushed banks to adopt and focus on technology. Previously, he also served on the RBI board as representative of the financial services department.
The surprise appointment won’t drastically alter the course of India’s monetary policy, analysts said. Most economists in a Bloomberg survey expect the central bank to cut rates starting early next year.
He’s expected to continue with a “practical approach” and avoid anything “radical,” according to Aastha Gudwani, an economist with Barclays Plc.
“His work so far has focused on improving transparency, encouraging fair practices and simplifying processes,” Gudwani wrote in a note. “We expect the transition to be smooth and seamless.”
The new governor takes charge at a time when the central bank is in a tough spot. There is rising pressure on the RBI to cut interest rates as growth slowed to a seven-quarter low of 5.4% in the July-September period. Finance Minister Nirmala Sitharaman and Trade Minister Piyush Goyal recently said that high borrowing costs were hurting the economy.
“The new RBI chief will have tough challenges entering 2025,” said Madhavi Arora, an economist with Emkay Financial Services Ltd. “The policy trade-offs are getting acute on the domestic and external front, with rupee pressures mounting - none of which were as challenging in the same period last year.”
India’s central bank has kept policy rates unchanged for nearly two years now. In his last policy review, Das held the benchmark rate while taking steps to boost liquidity in the banking system and stem a decline in the rupee.
India’s inflation has remained well above the government-mandated inflation target of 4%. Price gains accelerated to a 14-month high of 6.21% in October and are expected to remain elevated in the coming months due to volatile food prices.
In addition to studying at Princeton in the US, Malhotra is a graduate from the Indian Institute of Technology, Kanpur. He is believed to have good relations with the finance minister, potentially allowing for better coordination of monetary and fiscal policy. His implementation of the new income tax regime is seen as a key achievement in his tenure in the ministry.
February Decision
Recently, Malhotra urged revenue officials to prioritize economic growth and exercise caution while issuing high-pitched demand notices to businesses amid the ongoing tax disputes with major companies, including Infosys Ltd.
“If growth continues to underwhelm, then obviously chances of interest rate cut increases, but a February rate cut still depends on data,” said Gaurav Kapur, an economist with IndusInd Bank Ltd.
The six-member monetary policy committee, which decides on rates, will see many new faces in the February meeting. Malhotra’s appointment follows the selection of three new external members in October. The government has invited applications for a replacement of Deputy Governor Michael Patra, whose term ends next month.
“The MPC will sport an almost new look by the next meeting – with five out of the six members being relatively new,” Gudwani wrote. “This newness will likely bring uncertainty.”
--With assistance from Shruti Srivastava, Debjit Chakraborty, Siddhartha Singh, Bhuma Shrivastava and Daniel Ten Kate.
(Updates with details throughout)
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