What’s in store for new RBI Governor Sanjay Malhotra

This report is from this week’s CNBC’s “Inside India” newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe here.

Just over twelve months ago, thousands of Indians gathered at Delhi’s Red Fort as Prime Minister Narendra Modi delivered his speech on the momentous occasion of India’s 75th Republic Day.

His message was crisp: Viksit Bharat 2047 — a promise to make India a developed nation by 2047.

The idea of a “developed India” is not new. In fact, it has been repeatedly floated over the 10 years that Prime Minister Modi has been in office.

The plan looked to be on track in January: India’s growth was outpacing other major economies, its stock market had overtaken Hong Kong’s to become the fourth largest in the world and dozens of tech unicorns were on the cusp of going public.

“On day one it may not be appropriate to start with bouncers, googlies and yorkers,” the 26th RBI governor said in a live press conference on Wednesday. (For the uninitiated, those are cricketing terms alluding to bowling in a non-traditional fashion.)

“Ours is still an economy that needs to develop as we enter ‘Amrit Kaal’ and to realize the vision of Viksit Bharat by 2047. The huge responsibility we have in ensuring that the growth this country has continues,” Malhotra added. Amrit Kaal is a phrase that roughly translates to “age of elixir.”

As investors ponder how Malhotra will execute his role in 2025, CNBC’s Inside India asked three market watchers what they expect and the decisions they would implement if they were in the governor’s chair.

Economist Shumita Deveshwar describes the RBI’s current situation as a “tricky spot.”

For one, the central bank is grappling with a “potential spillover impact of stubbornly high food prices on broader inflation, but no direct control through monetary policy,” the chief India economist at TS Lombard said.

Another growing worry is India’s “weaker than expected growth momentum,” she added.

To Deveshwar, the “middle ground” for the RBI now is to cut its cash reserve ratio (CRR) to increase liquidity and balance India’s growth-inflation challenge. The CRR is the minimum fraction of total deposits commercial banks have to keep as reserves in either cash or deposits with the central bank. The RBI reduced its CRR by 50 basis points to 4.5% in its recent policy meeting, in hopes of boosting liquidity, credit flows and economic growth.

Meanwhile, Deveshwar says it’s critical for the central bank to start cutting rates by February to boost India’s growth with lower financing costs, which in turn spur higher investments and borrowing by consumers and corporates.

“The central bank just cut the CRR rate to improve liquidity and has essentially signaled that rate cuts are coming. As investors, we’re not looking for meaningful change,” Dorson, who manages the Global X Active India ETF, explained. Global X’s parent, Mirae Asset, is one of the largest foreign asset managers in India.

Regardless of how Malholtra leads the charge at India’s central bank, the senior portfolio manager says the South Asian powerhouse “looks as attractive as ever.”

He highlighted China’s underwhelming stimulus measures and additional headwinds from U.S. President-elect Donald Trump serving as “a tailwind to the India story.”

Calling the recent GDP statistic a “one-off” drop, Dorson expects India’s average growth rate to be 6% per annum over the next five years. For this, he sees a “meaningful pick-up” in government spending over the next six months.

“Even if the government doesn’t meet the budget, this will allow officials to point towards ‘fiscal consolidation’ which the market should like as well. It feels like a ‘win-win’ [for India’s economy],” Dorson added.

India’s inflation slows from 14-year high. The country’s headline inflation came in at 5.48% in November, slowing from the 6.21% high logged in November. The latest number is also lower than the 5.53% expected by economists polled by Reuters and comes as the RBI held rates at 6.5% during its monetary policy meeting last week.

Indian stocks have inched lower this week. The Nifty 50 index has fallen by 0.5% so far this week to 24,548.7 points. The index has risen 13% this year.