The future of Reserve Bank of India (RBI) Governor Shaktikanta Das is under scrutiny as his term approaches its December 10 expiration, with no official word on an extension. This uncertainty coincides with India’s GDP growth slowing to 5.4% in the July-September quarter, falling short of the RBI’s 7% projection.
The deceleration has intensified calls from government officials, including Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal, for the RBI to cut interest rates to stimulate economic growth. However, the central bank remains cautious due to persistent inflationary pressures, with October’s inflation rate at 6.2%, exceeding the RBI’s comfort zone.
Economists are divided on the appropriate course of action. Radhika Piplani of DAM Capital Advisors Ltd. describes the slowdown as a “wake-up call for the RBI,” suggesting that delaying rate cuts could necessitate more substantial reductions in the future. Conversely, IDFC First Bank’s Chief Economist Gaura Sen Gupta advises against premature cuts due to transmission lags, while Deutsche Bank’s Kaushik Das anticipates an initial reduction in the cash reserve ratio to enhance liquidity before any rate cuts.
The situation is further complicated by the impending expiration of terms for other key RBI officials, including Deputy Governor Michael Patra. This leadership uncertainty adds complexity to the central bank’s policy decisions amid economic challenges.
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As the RBI’s December monetary policy meeting approaches, all eyes are on whether Governor Das will receive an extension and how the central bank will navigate the delicate balance between fostering growth and controlling inflation.
