Tag: Shaktikanta Das

Shaktikanta Das, the new man in the Mint Street

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Just 24 hours after Urjit Patel resigned as governor of the Reserve Bank of India (RBI), the government has named a new man to the post – former department of economic affairs (DEA) secretary, Shaktikanta Das.

First the positives: Das is a veteran of the finance ministry and has seen many budgets and steered many confrontations between government and regulators. Also as secretary DEA he has grappled with issues in the equity and debt markets.

Secondly, as an IAS officer, he instantly earns the respect of the bureaucracy. While the current secretaries in the finance ministry may have been confrontational with the former governor, they will approach Das, a senior from the civil service, with deference. An-old-boys’-club camaraderie may help bridge difference of opinion that may have seemed unbridgeable under the previous governor.

Third, Das is India’s Sherpa to the G20 and would by now have many friends in the international circuit. In these days of trade wars and globalised volatility, governor Das may be better placed to phone-a-friend in similarly placed emerging economies. More importantly, Das comes without the baggage that has led to the current stand-off between the RBI and the government. Many a board member of the RBI has privately confessed that disagreements between RBI and government officials may have sometimes been exacerbated by ego problems. Here’s a chance for both sides to start with a clean slate.

And finally Das is described by acquaintances in civil service and RBI as one of the most amiable persons. This is in contrast to the former governor who earned for his post the moniker “reserved bank of India”.

The new governor may come with the handicap that he is probably the first in many decades not to have a formal doctoral degree in economics or finance. But past RBI governors aver this is no big disadvantage. The governor handles so many issues from payments to technology to personal finance to banking capital to rural development to markets to foreign exchange to monetary policy, that no governor would be a master of all. He necessarily depends on the highly competent staff of the RBI and often makes only common sense decisions between rival options. In fact, said a past RBI inmate, under Patel and to some extent Rajan, the RBI staff sometimes felt they were not being called upon to contribute as much as they could or wanted to. Governor Das, by plumbing the RBI cadres for more help may restore self esteem to the organisation.

That said there is no wishing away the challenges. Governor Das is walking into a landmine. The RBI top brass and past seniors are loath to part with their capital, and justly so. The government may well want that honey pot given that Goods and Services Tax (GST) revenues have been far lower than expected. The RBI top brass genuinely believes weak banks ought not to be let out of the PCA or the prompt corrective action framework, since they may end up bank rolling risky loans of over-leveraged non-banking financial companies (NBFCs). The government wants these banks to do precisely that so as to avoid job layoffs or disgruntled home buyers just before election season. The RBI top team is deeply conscious of their knowledge, their sense of duty and pride in RBI, while the government wants board members to supervise them closely. It hasn’t helped that at least one of the board members is an ideologue of the ruling party.

Governor Das has the hard task of bridging real and imagined differences. His handicap may be that he is seen as the government’s man and he may need to win the confidence of his own team at RBI even while delivering the tasks of a demanding government that will face the electorate in a few months. It is baptism by fire. But among the names doing the rounds, seems best suited to douse these fires and restore normalcy to government-central bank relations.

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Face of demonetisation and veteran bureaucrat: Meet Shaktikanta Das, the new RBI governor

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shaktikanta Das, who was named Reserve Bank of India (RBI) governor by the government after Urjit Patel’s shock resignation on Monday, was widely perceived to be a contender for the top job at the RBI after the exit of former governor Raghuram Rajan in 2016. He finally has got the big job.

Maybe it was destined as the following incident shows: Das is the signatory to the new Rs 1 note. The signatories are usually finance secretaries (other notes are signed by RBI governors) and the government, in a first, allowed Das, then the economic affairs secretary, to sign the note.

Das’s appointment is for three years. It is unusual for a government to appoint a retired bureaucrat though Das, a former finance secretary, maintains a busy schedule. He is member of the federal finance commission, and one of India’s serving G20 representatives.

A seasoned bureaucrat, he has big shoes to fill and plenty of challenges to deal with from the word go.

Firstly, it remains to be seen how the financial markets will receive his appointment. Patel’s exit followed a policy tussle with the government and sent tremors through financial markets on Tuesday, though shares recovered later, and investors were keen to see the government quickly name a credible replacement.

Both foreign and domestic investors say any openly political appointee with little macro-economic experience, would not sit well in equity, currency and debt markets that have already sold-off following setbacks suffered by Prime Minister Narendra Modi’s Bharatiya Janata Party in state elections this week.

Investors worry the government will use the central bank to do its short-term bidding to boost the economy for political reasons, with a general election due by May, without fully considering the long-term consequences for inflation and financial stability.

Investor Worries

Those fears are not entirely unfounded. Das is seen as close to the government and was touted by government officials as Patel’s successor almost immediately.

He was the face of one of the Narendra Modi government’s most controversial policies — the abolition and replacement of high-value bank notes in an attempt to crack down on black money. As the most visible and vocal bureaucrat at the time, Das often came under fire.

On the first anniversary of demonetisation, he tweeted: “Significant gains for the economy. Great memories of this day last year.”
Das, 61, previously served on the central bank’s board.

Last year, Das criticised the methodology of global rating agencies and sought a sovereign rating upgrade. Das has worked extensively in the budget division under both Modi’s government and the previous coalition led by the Congress.

He will have to answer questions before a panel of MPs on various aspects of demonetisation, including the counting of notes that returned to the system.

Urjit Patel in his capacity as RBI governor was due to appear before the panel.

The Supporting Voices

Still, Das is not without supporters. Ambit Capital’s Ashok Wadhwa told CNBC-TV18 that Das is one of the best people for the job in the current situation of the economy.

“This is an excellent choice, he has all the right credentials which are really suited for the job and this is an excellent choice. I think his past credentials, past experience will ensure that there is compatibility with the government and ministry of finance,” Nilesh Shah, MD and CEO, Envision Capital told CNBC-TV18.

Das holds a Master’s Degree from St Stephen’s College, Delhi University. He has worked closely with the Tamil Nadu government and has served as the special commissioner and commissioner of revenue administration for the Tamil Nadu government. He speaks good Tamil.

Prior to his tenure in the various ministries, Das served as a non-executive director at Indian Bank from December 9, 2009 to December 5, 2012 and was the director of Oil and Natural Gas Corporation (ONGC) and then the director at Life Insurance Corporation (LIC).

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Shaktikanta Das appointed as RBI governor: Experts react to government’s decision

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government on Tuesday appointed former finance secretary Shaktikanta Das as the new governor of the Reserve Bank of India (RBI).

Earlier on Tuesday, CNBC-TV18 had reported that Das was being considered for the post that was left vacant after Urjit Patel resigned on Monday, a move that surprised the industry.

“On account of personal reasons, I have decided to step down from my current position effective immediately,” Patel had said in a statement.

Das was appointed as India’s sherpa at the recent two-day annual G20 meeting held at Buenos Aires. A former civil servant, Das is also a member of the 15th Finance Commission.

Reacting to the government’s decision of appointing Das as the RBI governor, Nilesh Shah, managing director and CEO, Envision Capital, said that the government had made an “excellent” choice and that he had all the right credentials suited for the job.

“I think his past credentials, past experience will ensure that there is compatibility with the government and ministry of finance. Of course, his new hat will require him to kind of bring about and ensure autonomy of the RBI. So, I clearly think this is a great choice and I think his top priority will be to strike right balance between autonomy as well as compatibility with the government,” he said.

While Ashok Wadhwa, group CEO, Ambit Pvt Ltd, said that the government taking a speedy decision was commendable. He said that with the decision, the government has admitted that the most important seat in the authority can not remain vacant.

“We know that sometimes the process can take very long, so clearly the market should cheer this tomorrow morning that there is a governor at the Reserve Bank of India,” said Wadhwa.

“I think he is a balanced individual. Here is the person who is very experienced, he knows exactly how the government and the bureaucracy operates. Of course he will have to be independent, demonstrate autonomy and yet demonstrate compatibility within the operating environment. I would say given the current situation perhaps one of the best choices,” he added.

Anant Narayan, professor at SP Jain Institute of Management Research, however, said that “these are not normal times” to celebrate an appointment.

“This comes at the back of very core differences between the government and the RBI and we have seen some of the issues such as raiding of the RBI’s balance sheet, relaxation of PCA norms, giving forbearance on loan recognition and so on and so forth. Now putting somebody who is close to the dispensation will raise concerns that the government might push its way through on all these issues that Urjit Patel was resisting upon,” said Narayan, adding that the autonomy of the central bank will be under question.

Citing his experience in handling the budget of the government as one of the reasons, Amitabh Kant, CEO, NITI Aayog, said that Das was the most suitable candidate for the post.

“Shaktikanta Das is a very seasoned, very matured officer. He is also very distinguished officer. He has handled the budget of government of India sort of very long time. He has been the finance secretary of government of Tamil Nadu as well and has done budget for Tamil Nadu for very long period of time. I don’t think any other officer in government of India has the experience which Shaktikanta Das has in matters of finance both at government of India and at the state level. He has also been the industry secretary of Tamil Nadu and had steered investments across the range of areas particularly in the automobile sector. So, in terms of sheer experience of finance, industry, and budget he brings in a very formidable experience,” said Kant.

“He has great ability of consensus building. He has this great ability of taking his team along and he has a great ability of working as a team leader and I have known him for a very long time from my college days. Subsequently he is from my batch of the Indian Administrative Services and let me tell you very clearly that he is an outstanding choice, immense experience, immense maturity and tremendous caliber and great team leader,” Kant added.

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As India looks for new RBI head, investors worry about independence

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Reserve Bank of India (RBI) Governor Urjit Patel’s shock resignation following a policy tussle with the government sent tremors through financial markets on Tuesday, and investors are keen to see the government quickly name a credible replacement.

Both foreign and domestic investors say any openly political appointee with little macro-economic experience, would not sit well in equity, currency and debt markets that have already sold-off following setbacks suffered by Prime Minister Narendra Modi’s Bharatiya Janata Party in state polls this week.

Investors worry the government will use the central bank to do its short-term bidding to boost the economy for political reasons, with a general election due by May, without fully considering the long-term consequences for inflation and financial stability.

Patel announced his resignation on Monday, after India’s financial markets had closed.

Among the candidates close to Modi and being touted by government officials is Hasmukh Adhia, who retired as finance secretary in November.

He led Modi’s most controversial policies – the abolition and replacement of high-value bank notes in an attempt to crack down on black money, and the introduction of a nationwide goods and services tax.

(See a list of possible candidates below.)

“Governor Patel’s resignation leaves many open questions,” said Mitul Kotecha, senior emerging markets strategist at TD Securities. “Any hint of an overtly political appointee will likely not bode well for India’s markets over the medium term.”

The rupee touched a nearly one-month low against the U.S. dollar on Tuesday.

Following Patel’s announcement, forward contracts tracking the rupee against the dollar posted their biggest fall in more than five years.

Bond and equity markets also sold off sharply early in the day on Tuesday, before turning around later.

The timing of Patel’s resignation, along with the likelihood of losses for the BJP in the five state elections, may spell trouble for foreign investors who have been upbeat about India’s long-term prospects with Modi at the helm.

“We will have to see how much recovery the government can make by general elections next year,” said Ai Fujiwara, senior fund manager at Eastspring Investments. “Indian markets will likely remain volatile for now.”

Former RBI Governor Duvvuri Subbarao echoed investors’ concerns in comments to CNBC-TV18.

“The government will have to do some deliberation and serious introspection,” Subbarao said.

“The next incumbent governor will of course have the task of restoring the credibility of the RBI and entering into a working arrangement with the government which does not give the impression of being influenced beyond acceptable levels by the government.”

These are some of the people being discussed as possible candidates to replace Patel:

HASMUKH ADHIA:

Adhia, 60, retired as finance secretary in November. He was viewed as close to Modi and known as someone handpicked by Modi to spearhead the government’s most controversial move to date to abolish high-value banknotes, the so-called demonetisation.

He also served as principal secretary to Modi from 2003 to 2006, when Modi was chief minister of Gujarat state.

Adhia was at the front line of investors’ ire after a botched implementation of the nationwide goods and services tax in 2017. Critics said its complexities drove many small enterprises out of business and cost hundreds of thousands of people their jobs.

He was also criticised for implementing a tax on long-term capital gains that sent the stock markets tumbling. Widely known for his proximity to the top ranks of the BJP, the Gujarat-cadre bureaucrat moved to the finance ministry in 2014, months after Modi became prime minister.

SHAKTIKANTA DAS:

Das, 61, is former finance secretary and currently a member of the federal finance commission, and one of India’s serving G20 representatives. He was widely perceived to be a contender for the top job at the RBI after the exit of former governor Raghuram Rajan in 2016.

He previously served on the central bank’s board. Das came under fire for his pro-demonetisation stance and he was the most visible and vocal bureaucrat at the time Modi withdrew the high-value bank notes in 2016.

Last year, Das criticised the methodology of global rating agencies and sought a sovereign rating upgrade. Das has worked extensively in the budget division under both Modi’s government and the previous coalition led by the Congress.

SUBHASH CHANDRA GARG:

Garg, 58, the economic affairs secretary, was among the most outspoken in defence of the government as tension with the RBI were building up over governance and banking issues.

He called for more liquidity for the troubled shadow banking sector and also questioned the RBI’s governance structure. Garg also waded into controversy for undermining the central bank’s autonomy with his suggestion that India needed an independent payment regulatory board.

Perceived to be the finance ministry’s most staunch defender of its fiscal path, he has for months played down fears of a weakening rupee and steered attention to the RBI’s forex reserves as firepower to defend against any currency volatility.

SANJEEV SANYAL:

Sanyal is principal economic adviser to the finance ministry. An Oxford alumni, Sanyal represents India in several international forums and is the co-chair of the framework working group of the G20.

Sanyal, who quit as managing director and global strategist at Deutsche Bank in Mumbai in 2015 to join Modi’s finance ministry team, has worked in financial markets since the mid-1990s.

He has been closely involved in the bankruptcy reform process in his current role in the finance ministry. Sanyal has written several books on Indian history and geography.

RAKESH MOHAN:

Mohan, 70, had two stints as a deputy governor of the RBI. He has also served as secretary at the department of economic affairs in the finance ministry, and held positions at the International Monetary Fund.

He has previously been in charge of monetary policy, financial markets, economic research and statistics at the RBI. Mohan has written three books on urban economics and development, along with two on monetary policy.

Mohan, who has a PhD in economics from Princeton, teaches at Yale University as a senior fellow at the Jackson Institute for Global Affairs.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Former finance secretary and current member of finance commission Shaktikanta Das possible contender for RBI governor’s post

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Former finance secretary and current member of the finance commission Shaktikanta Das is likely to become the new Reserve Bank of India (RBI) governor, said sources familiar with the matter.

Das was appointed as India’s sherpa at the recent two-day annual G20 meeting held at Buenos Aires. A former civil servant, Das is also a member of the 15th Finance Commission.

Urjit Patel on Monday resigned from his post on account of personal reasons, with immediate effect.

The 54-year old Indian economist had served as the deputy governor for three years before his appointment as the governor on September 4, 2016.

“It has been my privilege and honour to serve in the Reserve Bank of India in various capacities over the years. The support and hard work of RBI staff, officers and management has been the proximate driver of the Bank’s considerable accomplishments in recent years. I take this opportunity to express gratitude to my colleagues and Directors of the RBI Central Board, and wish them all the best for the future, ” Patel said in a statement.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow