India’s new central bank governor takes over as economic growth slows and inflation rises

NEW DELHI (AP) — India got a new central bank governor on Wednesday as the country’s economic growth slows and inflation surges.

Sanjay Malhotra, a career civil servant, was appointed to a three-year term as head of the Reserve Bank of India, succeeding Shaktikanta Das, who retired as central bank governor after an extended six-year term.

India’s economy grew at a 5.4% annual pace in the last quarter, the weakest pace in nearly two years, while inflation rose to 6.2% in October, well above the RBI’s target of 4%, due to rapid increases in vegetable prices.

“Malhotra takes over at a time when there is a growing clamor for the RBI to ease policy rates in order to support growth. His challenge will be to steer the central bank through a period of global and domestic uncertainty,” the Indian Express newspaper said in an editorial.

In a brief statement Wednesday, Malhotra, who used to be a revenue secretary, said his focus would be on stability, quick implementation of policies, and economic growth,

“Stable policies are very important, whether it’s taxation, fiscal, or monetary policy,” he said.

He also said remaining “alert and agile” to meet the changes the world witnesses today, whether geopolitical tensions, the impact of climate change or political uncertainty, was a must.

“People need continuity and stability rather than a day-to-day kind of policy,” he said.

Malhotra, 56, had earlier worked in India’s Ministry of Power and headed a public sector company that provided finance for rural electrification projects.

In his previous role as India’s revenue secretary, he was vocal about tax overreach. Speaking at a federal event in New Delhi last week, Malhora said that state officials had to work to improve the entire economy and not simply get more revenue via taxation.

“Revenue comes in only when there is some income. Therefore, we have to be very cautious so that we do not, as they say, kill the golden goose,” he said.

Last Friday, the central bank under Das left interest rates at 6.5%, unchanged since February last year, as rising food prices pushed inflation higher. However, it reduced the cash reserve ratio, which banks must hold to ease monetary conditions and support growth, to 4% from 4.5%.

Economists expect inflationary pressures to subside in the coming months, clearing the way for a rate cut in the spring.

“A slowdown in urban consumer spending is reigniting worries over structural weaknesses in India’s economy, as high inflation along with weak jobs and low wage growth hurt demand growth,” Shumita Deveshwar of TS Lombard said in a recent report.

The Reserve Bank has revised its forecast for economic growth in the April-March fiscal year to 6.6% from an earlier estimate of 7.2%. The central bank said the decline was mainly the result of a slowdown in mining and in some manufacturing industries, such as petroleum products, iron and steel and cement.

It said it expected a recovery in industrial activity helped by higher government spending following the lulls of the monsoon season.

“Supply chain pressures eased in October-November and fell below the historical average. The services sector continues to grow at a strong pace,” it said.

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Associated Press writer Aniruddha Ghosal from Hanoi, Vietnam contributed to this report.

Ashok Sharma, The Associated Press