While Urjit Patel’s exit amid increased tension between the Reserve Bank of India and the Bharatiya Janata Party-led government shocked many, the appointment of Shaktikanta Das, a retired career bureaucrat close to Finance Minister Arun Jaitley, has evoked widespread concern regarding the future autonomy of the central bank.
One of the key issues that caused Patel to call it quits was the Modi government’s pressure on the central bank to release its reserves of 3.6 trillion rupees (nearly US$50 billion), which the government wants to boost the economy in the lead-up to next year’s election. Now, all eyes are on Das to see how he deals with this crucial issue, since any misstep could conceivably undermine India’s banking system.
However, if judged by his conduct during demonetization days, he inspires little confidence. Das is an Indian Administrative Service officer who graduated in the 1980 “batch” and is currently a member of the Fifteenth Finance Commission. He also represents India at the G-20 in the role of a sherpa.
For most Indians he became a familiar face on television after the Narendra Modi government announced demonetization of high value currencies in November 2016, a policy which was slammed by many economists around the world and blamed for slowing down the country’s GDP growth.
Das, as the then economic affairs secretary, used to hold frequent press conferences to defend the government’s policy, even as the RBI remained silent and Governor Urjit Patel studiously avoided the media glare.
The government executed demonetization in what some dismissed as a ham-fisted manner and the country faced severe cash shortages with long queues in front of banks and ATMs. Das then took on the unenviable task of announcing various ad hoc changes to slow down withdrawals from banks and ATMs.
These changes were meant to contain the situation as the currency ban decision spun out of control, especially in rural areas where the reach of banks and ATMs was sparse. In short he came across as a man who was more than eager to toe the government line.
A year after demonetization, when even many of the policy’s supporters were disillusioned, Das continued to trumpet its benefits. Under his Twitter handle @DasShaktikanta he tweeted: “One year of demonetisation. Significant gains for the economy. Great memories of this day last year.”
On another occasion in January 2017, Das drew flak when he tried to browbeat Amazon on Twitter after the online commerce giant’s Canadian website displayed a doormat depicting the Indian flag. Amazon removed the offensive article from its website.
Das had tweeted, “Amazon, better behave. Desist from being flippant about Indian symbols & icons. Indifference will be at your own peril.” Many chided him for intemperate language and reminded him that he was a senior bureaucrat, and neither a politician nor a paid political party troll.
The other major contentious issue between the RBI and the Narendra Modi government was the Prompt Corrective Action (PCA) framework, under which as many as 11 public sector banks were placed due to stressed assets. The government wanted this measure to be relaxed, as it felt that the stringent norms created by the move hurt credit growth.
Observers now feel that Das may be more malleable in this respect, and shares of state-run lenders rose on Wednesday in anticipation that Das may relax PCA restrictions for banks.