Experience, they say, is a hard teacher. She gives the test first, and the lesson afterwards. Ask RBI Governor Shaktikanta Das.
If his first stint took off from a roughed-up pitch thanks to arguments and outrage over the central bank's waning credibility, autonomy and independence, only to be followed by the NBFC crisis and Covid-19 pandemic, his second term too saw multiple crises, and black swan events including two ongoing wars, and persistent inflation.
At the outset, Das' job seems much like sailing the seven oceans in a rowboat -- the task is both endless and exhausting, as uncertainties strike repeatedly at unexpected times and from unexpected directions.
Perhaps, Das himself wouldn't have imagined devoting his otherwise easy-going, post-retirement career to such a demanding role. But to everyone's surprise, he did the unthinkable -- a good job. With ease, he managed growth, liquidity, exchange rate volatility and financial market stability as if he was conquering a game of whack-a-mole.
Truth be told, Das was on nobody's list of likely RBI Governor picks and many even questioned the appointment of a historian as the chief custodian of currency. But what Das achieved over the next six years fetched him nothing less than a near-universal acknowledgement among global central bankers. From practically being an outsider, he went on to win the best central banker of the year award, each year for sometime now.
Incidentally, Das is the first non-economist in 28 years to be appointed as RBI Governor, but it took him no time to prove that running a central bank needs expertise in monetary economics, and one need not necessarily be a monetary economist. His appointment also restored the tradition of appointing bureaucrats after two economist incumbents. The tenures of both his predecessors, high-profile economists Dr Raghuram Rajan and Dr Urjit Patel, saw spats with the government, eroding confidence and credibility.
It seemed as if the ties between Mint Street and North Block were about to be severed with a knife when Das' appointment and his non-confrontational approach prevented the disaster.
Within days after taking over the reins, Das called an unscheduled press conference, where he managed to calm nerves without saying much. Next, he went on a marathon of stakeholder meetings comprising banks, financial institutions and rating agencies, offering nothing but an attentive ear. He wasted no time to put every platform to use, even making his debut on X, gave his first public speech within a month, and reached out regularly to market participants -- all of which helped push credibility concerns to background chitchat.
Despite being a newcomer, he boldly steered the RBI through conventional and unconventional measures. For instance, in early 2019, or just a few months after taking charge, he first floated the idea of challenging the conventional 25 bps move while a delivering a speech at a global event, and actually delivered it a few months later in August 2019, announcing an unconventional 35 bps repo rate cut. Until then, the RBI hiked or reduced rates in multiples of 25 bps, like most global central banks.
Likewise, following the pandemic when he chose to cut the policy repo rate to a historic low of 4%, and kept long-term interest rates low to facilitate economic recovery, the bond market had concerns of its own, resulting in a poor response to the government's borrowing programme. Das didn't hesitate to send repeated reminders that the orderly evolution of the yield curve was a public good and that both market participants and the RBI have a shared responsibility.
Those who interacted with him recall Das as an amiable and likable person, without being too interesting. If his composed and easygoing manner helped overcome the toughest of challenges, his faith in 'doing your best as an individual, while working as a team,' defined his core working style. He always had a sense of mission about him, but had absolutely no interest in leaving a legacy or stardom.
In fact, when asked about a potential extension of his term recently, Das as a matter of fact said, "Institutions are bigger than individuals. The institutions develop their own momentum, their own discipline, their own principles, guidelines, so institutions will always continue to function."
Clamping down on currency volatility and building up forex holdings were Das' other trademark moves, though they were censured. If the US, under Donald Trump's administration, had put India on the watch list for currency manipulators both in 2018 and 2020, the IMF joined the chorus, pointing out that management of the rupee had gone so far as to no longer make it a floating exchange rate. But Das, being Das, pushed back saying that the US practice of putting emerging markets on a watchlist failed to take into account the challenges they face.
Going one step further, he began a push for internationalizing the rupee by enhancing India's role in global trade and investment, which in turn will reduce exchange rate risks.
If Patel can take the applause for conceptualising the monetary policy framework, Das was the man who implemented it, by working out amendments as well as meeting the inflation target. And unlike global central bankers, he refused to be an inflationist, which is to increase currency printing and instead preferred keeping an Arjuna's eye on inflation.
As for gold reserves, the central bank needed more than a hero to rewrite history and Das comfortably did the honours. If the last three years saw the RBI aggressively adding to the pile of gold reserves, it also saw some unusual developments. For the first time in several decades, the RBI quietly brought back 214 tonnes of gold from the Bank of England's vaults in London to India. These shipments marked the first large-scale repatriation since the 1990s and as on September, over half of the 855 tonnes of the RBI's gold, or 510.5 tonnes to be precise, are now stored within the country.
Das, a retired career-bureaucrat, was first appointed as the RBI's 25th Governor on December 12, 2018. In 2021, he was given a three-year extension, and his current term is set to end on December 10.
Had the government tapped him for a third term, he would have joined the leagues of Benegal Rama Rau, who served as the longest governor for 7.5 years between 1949 and 1957. Regardless, from an accidental central bank chief, with zero experience in monetary policy, Das' out-of-the-box-RBI appointment not only created history, but perhaps gave him a deserving finish.
