Sanjay Malhotra assumes charge as new RBI governor amid economic challenges

Malhotra's appointment marks him as the first RBI governor since Duvvuri Subbarao to transition directly from the Finance Ministry

Sanjay Malhotra, 56, officially assumed office as the 26th governor of the Reserve Bank of India (RBI) for a three-year term. A Princeton-educated revenue secretary and veteran bureaucrat with over three decades of civil service experience, Malhotra succeeds Shaktikanta Das, who served as RBI governor for six years.

 

Malhotra’s appointment makes him the first RBI governor since Duvvuri Subbarao to transition directly from the Finance Ministry, a move that has surprised many in government circles.

 

From revenue secretary to RBI governor

Before taking up his new role, Malhotra served as revenue secretary, where he played a pivotal role in several economic reforms, including:

• Rationalising capital gains tax in the Union Budget.
• Overhauling income tax slabs in the new regime to encourage migration from the old system.
• Removing the windfall gains tax, benefiting the oil refining sector.
• Advocating a 28 per cent GST on online gaming in discussions with the GST Council.

Malhotra’s extensive career includes serving as chairman and managing director of the Rural Electrification Corporation (REC) and as additional secretary in the Ministry of Power. Between 2003 and 2018, he held various roles in his home cadre, working in mining, energy, and revenue departments.

 

Challenges ahead: Slow growth and high inflation

Malhotra takes charge during a challenging economic period. Retail inflation surged to 6.2 per cent in November, breaching the RBI’s upper tolerance limit, while gross domestic product (GDP) growth slowed to 5.4 per cent in the July-September quarter. The RBI recently revised its FY25 growth forecast to 6.6 per cent from 7 per cent.

 

Last week, the RBI kept the benchmark repo rate unchanged at 6.5 per cent to combat inflation but reduced the cash reserve ratio (CRR) by 50 basis points to inject liquidity into the banking system.

 

The next Monetary Policy Committee (MPC) meeting is scheduled for February 5-7, 2025, following the Union Budget 2025-26 announcement.  Watch Video:  Challenges for the new RBI Governor Sanjay Malhotra

 

Governor’s focus on economic priorities

Ahead of his appointment, Malhotra emphasised the importance of understanding the economic landscape and prioritising what is best for the economy. Speaking to reporters last week, he said:

 

“Let me first go, join… One has to understand the turf, all perspectives, and do what’s best for the economy. Here it is a different role.”

 

Malhotra’s vast experience and transition from the Finance Ministry to the RBI bring unique perspectives to the central bank at a critical juncture for the Indian economy.