New RBI Governor Sanjay Malhotra warned of killing ‘Golden Goose’

By Ruchi Bhatia, Siddhartha Singh and Dan Strumpf

India’s new central bank head is a detail-oriented bureaucrat known for working long hours. That discipline will come in handy as he looks to reverse India’s growth slowdown and keep price rises in check.

Sanjay Malhotra, the Princeton-educated revenue secretary and three-decade veteran of India’s civil service, is the second career bureaucrat in a row to lead the Reserve Bank of India, replacing Shaktikanta Das after six years in the post.

Colleagues and other officials describe Malhotra, 56, as a savvy communicator and a meticulous administrator, known for working late, drinking lots of coconut water and going into the weeds on India’s byzantine tax laws — at times demonstrating more knowledge in meetings than the subject-matter experts reporting to him.

Prime Minister Narendra Modi’s appointment of Malhotra came as a last-minute surprise to many in the government. Described by officials as a “dark horse” whose appointment was like “pulling a rabbit out of the hat,” Malhotra comes with a low profile and a history of shunning the spotlight — qualities that likely worked in his favor with an Indian leader known for his preference for team players over outspoken challengers.

While Malhotra’s precise views on monetary policy remain something of a mystery, analysts and officials say his years in the Finance Ministry have given him a consensus-building approach that prioritizes economic growth and revenue generation. Officials also say he won the confidence of Finance Minister Nirmala Sitharaman along with Modi.

A Finance Ministry spokesperson didn’t respond to a request for a comment.

In one of his few public appearances ahead of Monday’s announcement, he told tax officials to keep economic growth in mind and avoid saddling businesses with overly large tax demands.

“Revenue comes in only when there is some income,” he told officers at the Directorate of Revenue Intelligence, according to local media reports. “Therefore, we have to be very cautious so that we do not, as they say, kill the golden goose.”

As the head of India’s central bank, Malhotra inherits the management of an economy beset with the dual challenge of rising prices and slowing growth. Last month, the government said the economy expanded at a seven-quarter low of 5.4 per cent between July and September, putting pressure on the bank to reduce what other top officials in Modi’s government have said are overly high borrowing costs.

At the same time, the inflation rate remains well above the government-mandated target of 4 per cent, with price gains accelerating to a 14-month high of 6.21 per cent in October, lifted by volatile food prices.

While the combination leaves the new central banker with a difficult balancing act, several analysts said they expect Malhotra to take an accommodative approach to India’s monetary policy in the months ahead.

In his first speech since assuming the post on Wednesday, Malhotra said that “stability, trust and growth” are “very pertinent in an economy that still needs to develop as we are entering into amrit kaal,” using a Hindi term that loosely translates to “golden era” and often makes an appearance in Modi’s speeches.

The RBI is responsible for “ensuring that the growth this country has continues,” he said.

Economists at Nomura Holdings Inc. said they expect a quarter-point cut to the central bank’s benchmark interest rate at the next meeting of the bank’s Monetary Policy Committee in February, projecting a total cut of one percentage point to 5.5 per cent by the end of next year. 

“A rate cut at the February MPC meeting is now likely cemented (and also warranted, in our view),” the economists, Sonal Varma and Aurodeep Nandi, wrote in a note to clients. 

Dhiraj Nim, economist at Australia & New Zealand Banking Corp., also forecast a February rate cut of a quarter-point. Still, he said it was too soon to form a full picture of Malhotra’s views. 

“We don’t know much about the new governor’s views on growth, inflation and the rupee,” Nim wrote. He added: “It may not be prudent to categorize him strictly as a dove or a hawk just yet.” 

Another challenge facing Malhotra will be overseeing a six-person policy committee in the midst of major turnover. Three new members joined in October alone, and Deputy Governor Michael Patra is due to step down in January.  

Like his predecessor, Malhotra is not a trained economist and doesn’t come with a history of vocal positions on fiscal or monetary policy. This may make him more closely aligned with the central government on policy matters while avoiding any outward public spats — at least at first, economists said. 

While at the Finance Ministry, he worked to expand the adoption of India’s more simplified tax regime, intended to boost revenue by easing the compliance burden for ordinary Indians. He was a key driver of an online gaming tax of 28 per cent and was instrumental in leading the global anti-money laundering watchdog FATF’s evaluation of India.

He was also credited with managing the backlash to changes by the government earlier this year to India’s long-term capital gains tax. Known for a long schedule sometimes running from 9:30 am to 9 pm, Malhotra could often be found working late into the night tweaking press releases and social-media posts, while also helping to ease concerns from stakeholders, officials said. 

Another asset, they said, was his methodical approach to problems, coming to a decision after hearing out all views. That quality will likely prove useful at a central bank staffed with a large number of senior executives, they said.