Shaktikanta Das, the RBI Governor, and Indian State

Shaktikanta Das was appointed as RBI Governor within 24 hours of the resignation of Urjit Patel. For the job as important as RBI Governor, it would be expected that the Government will need some time to come up with the replacement, but that was not to be. It was almost like the Government knew all along that Urjit Patel is going to resign for personal reasons and they were ready with the replacement.

What could have been the qualifications of Shaktikanta Das that Arun Jaitley was convinced that he is the man for the job? Does Shaktikanta Das have with him to benefit the real Indian economy? Is the RBI autonomy important for anyone?

Shaktikanta Das gives what the Government wants

The government of India wants the repo rate to be reduced. Check.

The government of India wants a major part of RBI reserves as the dividend. Check. In fact, in the first meeting as RBI Governor, Shaktikanta Das appointed a committee to look into the issue. But the government could not wait for the committee to submit the report. So, anyways Shaktikanta Das signed on the cheque.

The government of India wants a relaxation of Prompt Correction Action (PCA) for weak banks. Check.

The government of India wants liquidity in the system so that NBFCs and share market can continue whatever they are doing. Check.

In short, Shaktikanta Das gives whatever his ex-Boss wants him to do. He does not seem to remember that he is no longer a Government Secretary but RBI Governor.

The real economy

Shaktikanta Das reduced the repo rate (2 members voted against the reduction. Michael Patra was terrified by the new Boss to not to vote for the status-quo but reduction. Urjit Patel would have surely voted for the status-quo. That would have made 4 votes for no change. But with Shaktikanta Das into the picture, 4-2 became 2-4.). But, the banks would not pass the rate reduction to customers and hence the economy.

The 68,000 Cr passed to the Government of India from the RBI reserves. Who will bail out the Government next year?

Banks, NBFCs and share market allowed to continue to make merry. Who is going to pay the bill when the party stops?

The real economy is sputtering no matter how much the Government makes up the GDP data.

Raghuram Rajan and Urjit Patel could have been trusted to bring back the economy on track. What to expect from a rubber stamp when the economy requires real attention?

The insipid market, media and leaders

RBI Deputy Governor Viral Acharya said, “the governments that did not respect their central bank’s independence would sooner or later incur the wrath of financial markets”. Media made a big hue and cry for 3-4 days about Urjit Patel’s departure. Almost all political leaders said that what happened was a matter of great concern.

Fast forward to one month, two months. Shaktikanta Das does whatever Urjit Patel would not have done and nobody remembers to say a word about the action of the RBI Governor.

Everybody seems to have accepted that the Shaktikanta Das tenure is fait accompli. Rather, the capital market seems to be celebrating.

Two hoots for the RBI autonomy.


The pliable, the rubber stamp, the yes-man IAS serves the Indian State the best. The real economy is on an auto-pilot. Markets are the by-product of the defunct Indian State, the media is the mirror and the less said about the lawmakers the better.

The above is my learning from the appointment of Shaktikanta Das as RBI Governor.

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