India’s Departing Central Bank Governor Leaves a Lasting Legacy

(Bloomberg) — As Shaktikanta Das finishes up his tenure as India’s central bank governor, handing over the reins to a career bureaucrat, many have praised his performance as a relative outsider who leaned on diplomacy to propel the world’s fastest-growing major economy to new heights. 

Over the past few years, Das steered the Reserve Bank of India through pandemic lockdowns and digitization of numerous facets of life in the South Asian nation. He held his seat for six years, making him the second-longest-serving leader of the central bank. 

“I have tried to give my best to the institution,” he said at a press event on Tuesday. Asked if he plans to return to public office after stepping down from the RBI, Das said: “I will think about it.” 

His achievements are noteworthy partly because many predicted he would fail. When India named Das to lead the RBI in 2018, critics pointed to his lack of formal economic training and the role he had played in a failed attempt to root out black money by banning most currency notes.

Though many expected the government to extend Das’s tenure — and tied the final choice of Sanjay Malhotra to recent friction with officials — he’s nonetheless leaving his post on Tuesday with plenty of fans.

“If you had asked me in 2018 if Das was the right choice, I would have expressed doubt,” said Amol Agrawal, who teaches economics at Ahmedabad University. “Yet here we are in 2024, standing strong.”

Das’ adaptability didn’t mean perfection. Described by colleagues as mild-mannered and disciplined, he occasionally faced criticism for micromanagement by commercial bankers. And while diplomatic, Das wasn’t afraid to go toe-to-toe with India’s government or diverge from other central banks that maintained continuity with stances held by the US Federal Reserve. 

Yet Das’ peers credited him with understanding his limitations as a non-economist. They say he kept his focus on one thing: preserving India’s financial stability. 

That mission took various forms, including building up the world’s fourth-largest foreign exchange reserve and ensuring stability of the rupee.

By many accounts, Das was also an effective communicator with the markets, framing low bond yields as a “public good” and helping develop a sophisticated digital payments system that operates round-the-clock. He also ramped up adoption of a mobile platform known as Unified Payments Interface, which is now used to pay for everything from electricity bills to rickshaw rides.

“He’s a consensus builder,” said Soumya Kanti Ghosh, Chief Economic Advisor of the State Bank of India.

Das, a civil servant who was a member of India’s 15th Finance Commission, cultivated a more collaborative relationship with the central government compared to Urjit Patel, his predecessor.

Das mostly refrained from public criticism of government policies, though he was vocal about issues he perceived as threats to financial stability. Notably, he strongly opposed legalization of private cryptocurrencies, calling them a “ponzi scheme.”

Behind the scenes, Das also resisted using the RBI’s foreign exchange reserves for infrastructure projects and he opposed increasing foreign ownership of Indian debt, citing potential risks to market stability. 

India’s inclusion in JPMorgan Chase & Co.’s emerging markets bond index was delayed partly because of hesitation within the RBI, according to people familiar with the matter. The central bank didn’t respond to a request for comment.

Though Das was widely expected to get an extension, events in recent days suggested change might be afoot. The government kept silent about his future until Monday, a day before his term was scheduled to end. 

Reasons for the apparent pivot are still murky. During his final policy announcement last week, Das held interest rates steady, despite pressure from the government to ease them amid an unexpected slowdown in economic growth. In keeping the policy repo rate unchanged at 6.5%, Das said the RBI’s legal mandate was to control inflation.

In a note, Nomura Holdings Inc. analysts led by Sonal Varma described a “stark divide” between the government and Das. Over the past few weeks, Finance Minister Nirmala Sitharaman and Trade Minister Piyush Goyal advocated for countercyclical monetary policy, such as rate cuts. But Das wanted to keep rates steady during a Dec. 6 policy meeting.

Das leaves at a time when global markets are nervous about US President-elect Donald Trump’s threats of higher tariffs on places including China, Mexico and Canada. In the last six years, the RBI has focused on financial and exchange rate stability. Malhotra will likely focus on protecting the rupee amid a potential tariff war.

Even so, many agree that Das has built a strong foundation for his successor. Economists credit him with transforming the RBI into a nimbler, more modern version of itself. 

“A repeat of Das is unlikely,” said Agrawal of Ahmedabad University.

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