The Reserve Bank of India (RBI), under the leadership of Shaktikanta Das, demonstrated remarkable resilience by prioritizing inflation control over rate cuts despite pressures throughout 2024. However, as Das concluded his six-year tenure, navigating the nation through economic turbulence, the baton now passes to the meticulous Sanjay Malhotra.
Shaktikanta Das: A Legacy of Steadfast Leadership
Das, a career bureaucrat known for steering India’s demonetization in 2016, leaves behind a legacy of prudent monetary policy. Under his leadership, the RBI held interest rates steady for nearly two years, even as economic growth slowed to a seven-quarter low in the July-September quarter of 2024. His unwavering focus on inflation earned him global accolades, including the prestigious “Central Banker of the Year” award.
Despite dissent from government officials advocating for rate cuts to boost growth, Das adhered strictly to the RBI’s inflation-targeting framework, emphasizing the need for credibility in monetary policy. His tenure was marked by a strategic balance between fiscal and monetary policies, even as inflation climbed above 6% and GDP growth fell below expectations.
The Transition to Sanjay Malhotra
Malhotra, another seasoned civil servant, took office on December 11, 2024, amidst growing anticipation of policy shifts. Analysts are divided over whether Malhotra will introduce a rate cut in February, especially given the external pressures, such as the U.S. Federal Reserve’s cautious stance and its impact on the rupee.
His appointment comes at a critical juncture, with five of the six members of the Monetary Policy Committee (MPC) either new or relatively inexperienced. This fresh composition may influence the RBI’s policy direction in 2025.
Key Challenges Ahead
- Balancing Growth and Inflation: While inflation remains a priority, calls for measures to stimulate economic activity are growing louder. Critics argue that shallow rate cuts of 0.50% may have limited impact on economic momentum.
- Currency Volatility: The rupee’s decline to a historic low of ₹85 per dollar and the depletion of forex reserves from a peak of $704.9 billion in September to $654.9 billion in December present pressing challenges.
- Reviving Credit Growth: Regulatory measures and limited deposit growth have slowed credit expansion. Restoring momentum will require balancing liquidity measures with cautious oversight.
Looking Ahead
Under Malhotra, the RBI aims to uphold growth, stability, and trust as central tenets of its policy. With initiatives such as the e-rupee gaining traction and clarity on cryptocurrency expected in 2025, the central bank is poised to address emerging challenges while supporting India’s vision of becoming a developed nation by 2047.
As India enters a new phase of monetary policymaking, all eyes will be on February’s MPC meeting, where decisions on interest rates could set the tone for the nation’s economic trajectory under Malhotra’s stewardship.
