Sanjay Malhotra to command last leg of RBI’s war on inflation

Malhotra becomes the latest finance ministry official to steer RBI, after outgoing governor Das, as well as previous governors D. Subbarao, Y.V. Reddy and Bimal Jalan

New Delhi: The war on inflation has a new general leading the charge, as India’s top revenue officer Sanjay Malhotra moves from North Block to Mint Road. On Monday, the Union cabinet’s appointments committee named the 1990 batch IAS officer to lead the Reserve Bank of India, a day before governor Shaktikanta Das leaves at the end of six years at its helm.

Sanjay Malhotra to steer RBI (PTI)

Malhotra becomes the latest finance ministry official to steer RBI, after outgoing governor Das, as well as previous governors D. Subbarao, Y.V. Reddy and Bimal Jalan. The officials come with a deep understanding of fiscal matters and the pressures on the government, even as they take the reins of India’s inflation-targeting central bank.

Malhotra, who currently oversees the Centre’s direct and indirect tax administration, will serve for three years beginning Tuesday, the appointments committee comprising Prime Minister Narendra Modi and home minister Amit Shah said. The Rajasthan cadre officer has previously led the department of financial services and worked across power, mining and information technology.

Like Das, Malhotra will have to deal with stubborn food prices that have pushed headline inflation beyond the monetary policy committee’s (MPC) flexible target of 2-6%. In October, inflation as measured by the consumer price index (CPI) was 6.21%, higher than 5.49% in September.

The committee now expects retail inflation to soften to 4% only by the September quarter of FY26. Meanwhile, the rupee trades near all-time lows, amid strong demand for the dollar and portfolio outflows.

At his final policy statement on Friday, Das said that RBI’s anti-inflationary monetary policy stance has been a crucial factor in bringing about a significant disinflation. “Going forward, as food price shocks wane, headline inflation is likely to ease and realign with the target as per our projections,” he said, adding that at present, it is necessary to wait for and monitor incoming data for confirmation of the decline in inflation.

A Reuters report quoting economists at Capital Economics said they expected a 25 basis point cut in India’s repo rate at Malhotra’s first MPC meeting in February, compared to April under Das’s leadership.

The external environment remains challenging as well. US President-elect Donald Trump has taken a tough stance on imports, promising significant tariffs on Chinese goods and a loose fiscal policy. In a recent interview with the Financial Times, Das said “protectionism and tariffs”, as well as “geo-economic fragmentation”, supply chain bottlenecks and surging commodity prices due to conflict are the “biggest potential challenges” for India.

Malhotra’s appointment comes just months after the government appointed three new members to MPC. With new external members, a new governor, and a new deputy governor who is yet to be appointed, the committee’s February meeting will be keenly watched.

The six-member MPC has three external candidates with four-year terms. In October, the government appointed Ram Singh, director, Delhi School of Economics, University of Delhi; Saugata Bhattacharya, former economist, Axis Bank; and Nagesh Kumar, director and chief executive, Institute for Studies in Industrial Development, New Delhi to the committee. The internal members include RBI executive director Rajiv Ranjan, and deputy governor Michael Debabrata Patra, apart from the governor.

Madhavi Arora, chief economist at Emkay Global Financial Services said the new governor and MPC members will also have different policy challenges and macro and global landscape in 2025, as against what Das and the erstwhile MPC faced at the beginning of 2024.