New Indian central bank governor takes office as economic growth slows and inflation rises

NEW DELHI– Sanjay Malhotra, a career civil servant, became the new governor of India’s central bank on Wednesday, as the country’s economic growth slows and inflation rises.

The Reserve Bank of India said Malhotra, a former revenue secretary, would formulate India’s monetary policy for the next three years.

He succeeds Shaktikanta Das, who retired as RBI governor after an extended tenure of six years.

GDP growth slowed to 5.4% in the quarter ending in September, the weakest level in seven quarters, while inflation in October exceeded the central bank’s 6% tolerance band for reach 6.21%, driven by a rapid increase in vegetable prices.

“Malhotra takes over at a time of growing calls for the RBI to cut policy rates to support growth. His challenge will be to guide the central bank through a period of global and domestic uncertainty,” the Indian Express newspaper said in an editorial.

The Das-led central bank last Friday left interest rates at 6.5%, unchanged since February last year, as rising food prices threatened to spur retail inflation . However, it reduced the cash reserve ratio, which banks must hold to ease monetary conditions and support growth, from 4.5% to 4%.

It revised the GDP growth forecast to 6.6% from 7.2% previously for the April-March fiscal year. The central bank said the decline was mainly due to a substantial deceleration in industrial growth due to poor performance of manufacturing companies, a contraction in mining activity and a drop in electricity demand.

The central bank said the weakness in the manufacturing sector was not widespread but limited to specific sectors such as petroleum products, iron and steel and cement.