Managing the interest rate regime amid inflationary pressures and a slowing growth rate, along with handling rupee volatility, especially against the dollar, will be the immediate challenge for Das, if he gets an extension.

India’s retail inflation based on the consumer price index (CPI) in October, inched upward to a 14-month high of 6.21 per cent, from 5.49 in September.

Das has repeatedly underlined his concerns over food inflation, which rose to 10.9 per cent — the highest in 15 months. However, the problem for him and others at the country's central bank is that ministers of the Union government have been nudging for an interest rate curb, arguing that the core inflation rate is manageably low and industry needs a prop up.

The US Federal Reserve, in September, announced an interest rate cut of 50 basis points, followed by another 25 basis points reduction earlier this month.  

Several central banks resorted to interest rate cuts after the US Fed's decision. However, the RBI refrained from any reduction, indicating that India’s policies are autonomous and unrelated to any other economy.

Notwithstanding a rise in the chorus for a policy rate cut, the RBI has kept the rate steady at 6.5 per cent, even as the divergence of opinions among the central bank’s then MPC members increased in October.

“With a rise in geopolitical risks, monetary policy will be crucial in the coming months. At this stage, the government is set to opt for continuity, rely on Das and refrain from appointing a new Governor,” an insider said, adding that a final decision is yet to be taken.

RBI’s New Look MPC

Meanwhile, the RBI has invited applications for the post of Deputy Governor, with Monetary Policy Committee (MPC) member and Deputy Governor Michael Debabrata Patra’s tenure ending in January.

Three external members of the MPC — Ram Singh, Director, Delhi School of Economics, Saugata Bhattacharya, economist and former Senior Vice President at Axis Bank, and Nagesh Kumar, Director and CEO of Institute for Studies in Industrial Development, were appointed last month.

They replaced Ashima Goyal, Jayanth R Varma, and Shashanka Bhide, after their tenures ended on October 4.

An Impactful Tenure

Once considered an outsider, Das, who has been named the central banker of the year twice in a row by US-based Global Finance magazine, has deftly managed a series of economic crises since the outbreak of the COVID-19 pandemic. The RBI opted to cut rates drastically to fight the economic impact of the global pandemic, a policy that seems to have helped Indian industry survive.

Besides, the central bank also allowed commercial banks to offer a three-month moratorium to customers on all term loans, a move which again eased the pain of adjusting to lower sales and money churn all around.

By and large, India has also kept its growth engine going, despite the Russia-Ukraine war, and more recently the Israel-Hamas conflict.

Meanwhile, Das has been pushing for rupee trade to internationalise the Indian currency, and has been instrumental in promoting digital payments within the country and outside.

Das was appointed Governor in December 2018, after his predecessor Urjit Patel suddenly opted to resign amid a high-pitched debate over the erosion of the central bank’s autonomy. Das’ colleagues credit him for being a “people’s man” and for arriving at solutions through dialogues and consensus.

Economists and policy managers said given the current global tensions, the RBI will have to delicately manage its monetary policy to maintain economic stability while boosting growth.