Shaktikanta Das
File image of Shaktikanta Das | Kiyoshi Ota/Bloomberg
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Shaktikanta Das has served under the Modi government but civil servants appointed to the post of RBI governor don’t always toe the line. 

New Delhi: Shaktikanta Das took over as the 25th Governor of the Reserve Bank of India Wednesday, two days after Urjit Patel abruptly demitted office over mounting differences between the government and the central bank.

Before his current assignment, Das had served as the secretary in the Department of Economic Affairs as well as the Department of Revenue under the Modi government.

His appointment has raised hopes in the government and among banks that the RBI will be much more sympathetic to issues raised by them. There are hopes that there could be some relaxation in the prompt corrective action framework for weak banks and headway on the issue of transfer of surplus reserves.

However, as previous appointments have shown, civil servants appointed as RBI heads do not necessarily toe the government line.

For instance, D. Subbarao, finance secretary to the government, was appointed by the UPA as the RBI governor in September 2008.

He did not agree with the government on an expansive monetary policy and therefore invited the ire of the then finance minister P Chidambaram. Upset about the RBI not slashing interest rates in October 2012, Chidambaram famously said that “the government will walk alone to face the challenge of growth”.

Also read: RBI Governor Urjit Patel paid a heavy price for his unseemly power grab

A balancing act

Although Das will not face much pressure from the government on interest rates, as they are now being set by the monetary policy committee looking to achieve an inflation target of 4 per cent, he will face the challenge of balancing the central bank’s need for caution and the government’s expectations.

Das’s comments on microblogging site Twitter over the last few months provide an insight into his thinking on key macroeconomic issues. He favours the government sticking to its fiscal deficit target, does not advocate any knee-jerk reaction to support the rupee but feels that emerging economies need to be prepared for prolonged global headwinds.

A look at what his stance is on some key issues:

On the role of central banks: October 18

Das appears to favour central banks taking “decisive steps in pursuit of their multiple responsibilities”.

On global shocks: October 15

Das has called for emerging economies to be prepared for such shocks with prudent fiscal and monetary policies.

On knee-jerk measures to support rupee: September 15

Das suggests that focus here should continue on steadying the banking sector.

On the need to stick to fiscal deficit targets: September 15

Das believes that a strong commitment to fiscal deficit target will have a positive impact on bond yields, inflation and currency value.

On benefits of strong macroeconomic fundamentals: September 12

According to Das, “India’s macroeconomic numbers are its biggest insurance against global uncertainties”.

Also read: RBI chief Shaktikanta Das faces a long to-do list in new job

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