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RBI governor Shaktikanta Das’ term has been extended by another three years and will now stretch to December 2024. If he completes it, it will make him one of the longest serving governors.
It’s a sensible move given today’s context.
RBI is in the midst of its loosest monetary policy in living memory. It’s been the first line of defence in the economic response to the Covid-19 induced shock. Recently, the central bank has signalled that it may begin reversing the current policy.
It’s going to be a challenging phase because not only are economic growth impulses weak, GoI has clearly indicated that fiscal policy will only get tighter from now on.
This forthcoming phase requires close coordination between the RBI and finance ministry. In this context, the comfort level that appears to exist between Governor Das and GoI will be an important factor in a smooth exit from the current situation.
It makes sense for GoI to opt for stability at the top of India’s most important regulator.