Former Economic Affairs Secretary Shaktikanta Das was named the 25th Governor of the Reserve Bank of India to succeed Urjit Patel, who resigned suddenly on Monday amid a bitter dispute over the regulator’s autonomy.
The appointment means that the central bank will once again be headed by a former Indian Administrative Services (IAS) officer. Patel, who had said he was resigning for personal reasons, and his predecessor Raghuram Rajan are economists.
The government began the selection process soon after Patel’s resignation. It was expedited as the government didn’t want the post to remain vacant at a crucial juncture. The appointment will be for three years.
Das, 63, a veteran Tamil Nadu cadre officer, will first have to work on normalizing the relationship between the central bank and the government that had turned frosty in the past few months as the two differed on many issue .
Das had been instrumental in establishing the monetary policy committee (MPC) and the switchover to an inflation targeting regime, among other things. Now that he’s moving to the regulatory side, Das may even have to resist some of the ideas he supported when in government.
As economic affairs secretary from 2015 to 2017, Das has worked closely with the central bank. At present, he is also the government’s representative at the Group of 20 summits.
A 1980 batch Tamil Nadu batch IAS officer, Das took charge as as Union revenue secretary in June 2014. His was the first high-level bureaucratic rejig in the Finance Ministry after the Narendra Modi-led Government took over, an indication of his being in the good books of the prime minister.
Das was the key man behind the planning and execution of demonetization drive. Most of the public statements on demonetization had been made by him which led to the impression that the government was at the forefront of the drive instead of the RBI.
He was also the brain behind rolling out of the Goods and Services Tax (GST). He was instrumental in pushing GST soon after the Modi government took charge. As revenue secretary, he worked closely with Finance Minister Jaitley and the empowered committee of state finance ministers to break the deadlock and draw up the draft legislation.
Putting Das at the helm of the RBI might be seen as a move to steer the Central bank towards the government's point of view. A key issue that created a rift between the RBI and the government was the prompt corrective action (PCA) framework under which as many as 11 public sector Banks are placed now due to enormous stressed assets. The government says the stringent norms hurt credit growth.
As the new head of the RBI, Das will face the issues between the government and the Central bank that that have not been resolved fully. The RBI's reserves and the role of the RBI board in the decision-making process will be two hot issues that would require clarity.
