Given the situation he faces, the newly appointed Reserve bank of India(RBI) Governor Shaktikanta Das’s best option is to ensure that there is no new pressure to generate more activity in certain, especially short term job creating sectors of the economy, by easing liquidity restrictions. It would be an ideal solution for him if he does not have to loosen the purse strings under official prodding, until after the 2019 Lok Sabha polls are over. He will be seen as an independent official who did not bend to pressures from the top. The RBI too will recover some of its earlier glory as a truly autonomous institution that did not yield to official pressures even during election years. While the economy shows signs of a slow recovery, with GDP rate of growth not looking too bad at 7.2%, still among the fastest in the world.
However, what is worrying is that the overall political/ economic situation is still far from improving for the ruling NDA Government. The on-going two-day national strike will certainly not strengthen economic performance, not to improve industrial production or output. In fact it could not have come at a worse time for either the ruling NDA Government or for Mr. Das. While the opposition certainly still holds the upper hand in the present situation, it cannot be said that its gains have come through astute coordination or planning of the bandh call. This initiative comes mainly from the major Left Trade Unions, supported strongly by the TU wings of the Congress and other established trade unions.
The dates too were decided months ago, when the present crisis between the Centre and the RBI authorities had not developed. Experience shows that an average 30 per cent loss in terms of production and related activities cannot be avoided. 2019 being an election year again, ensures that neither the Centre nor the states, can afford to be too harsh against the central Trade Unions and thousands of their followers who have gone on strike. The ruling BJP has just lost polls in five states, three of them in Hindi-speaking areas. Given this kind of a backdrop with growing dissonance between the Centre and the states, coupled with a Congress recovery, the all-out opposition of the Bengal Government to the 48-hour bandh should please the NDA no end.
On the other hand the 48 hour disruption in the economy and the resultant long terms effects that will call for early corrective action by the Centre, will not make it easy for Mr. Das to deliver. In case the team Modi-Shah lose their nerve as they review the economic situation in about a week’s time, the pressures on the RBI to act as Santa Claus to the limping sectors of the economy can only increase.
In this situation, Mr. Das’s cautious comments outlining the long term dangers inherent in loan write-offs and an easing of liquidity in the banking system can only be seen as apt and inevitable. As with the NDA rulers, and common citizens, he can only wait and watch the trend of present developments—— but not for long.