Sanjay Malhotra, a career civil servant, has been appointed as the new governor of the Reserve Bank of India amidst a slowdown in economic growth and surging inflation. With India’s economy growing at a 5.4% annual pace, the lowest in two years, and inflation at 6.2% in October, well above the RBI’s target of 4%, there is pressure for the central bank to ease policy rates to support growth. Malhotra succeeds Shaktikanta Das and is tasked with navigating through global and domestic uncertainties.
The central bank, under Das, kept interest rates unchanged at 6.5% due to rising food prices pushing inflation higher. However, the cash reserve ratio was reduced to support growth. Economists expect inflation to subside in the coming months, potentially leading to a rate cut in the spring. A decline in urban consumer spending is raising concerns over structural weaknesses in the Indian economy, with high inflation and weak jobs and wage growth affecting demand.
The Reserve Bank has revised its economic growth forecast for the fiscal year from 7.2% to 6.6%, citing a slowdown in mining and certain manufacturing industries. It anticipates a recovery in industrial activity supported by higher government spending after the monsoon season. Supply chain pressures eased in October-November, and the services sector continues to grow at a strong pace. Malhotra’s leadership will be crucial in addressing the challenges and uncertainties facing India’s economy as he takes on his new role at the Reserve Bank of India.
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