An Outsider Takes The Helm At India’s Central Bank

Will India's economic policymaking apparatus finally become more stable?

Shaktikanta Das boasts a 30-year career as an impeccable officer and seasoned bureaucrat, with stints as secretary of economic affairs and of revenue in the Indian government. His educational credentials would be hard to improve upon, including study at the famed Indian Institute of Management Bangalore and training in advanced financial management and development banking and institutional credit at Pune’s National Institute of Bank Management.

So why, upon Das appointment as the 25th governor of the Reserve Bank of India, did trolls mock him for having a post-graduate degree in history?

The implication was that Prime Minister Narendra Modi couldn’t find anyone with a doctorate, like Das immediate predecessors, Urjit Patel and Raghuram Rajan, to take over the central bank.

Das appointment comes in the wake of Patel’s acrimonious exit owing to deep differences with the administration on liquidity management, foreign exchange reserves and the role of the RBI’s board. The new governor has been India’s sherpa at the G-20 and a member of the Finance Commission. On his first day, he vowed to assiduously protect the credibility of RBI and the institution’s autonomy. However, he’s seen as an outsider to core banking.

“Mr. Das will be initally considered more as a Finance Ministry insider,” said Sonal Varma, an economist at Nomura Plc in Singapore. “Only time will tell whether he preserves the RBI’s independence.”

In contrast to the reserved Patel, Das announced his arrival at the RBI through a tweet. Past governors of the 83-year-old institution, which now boasts reserves worth $420 billion, rarely had a Twitter handle. Yet, Das quick appointment was welcomed by equity markets with a surge of 629 points in the December 12 trading session. “Our analysis… suggests that he has a neutral-to-dovish bent on monetary policy,” Varma added. Das may initiate steps to open up the liquidity tap for small businesses and buy peace with the government—a shift from Patel’s more conservative policy.