Mr. Patel, 52 years old, who was appointed deputy governor in 2013, was the key official responsible for the central bank’s shift toward a monetary policy based more on consumer inflation. “Patel played a pivotal role as the RBI redefined itself as an inflation-targeting central bank, adopting CPI (instead of wholesale price index) as the anchor for monetary policy in early 2014”, said a Standard Chartered report. He will start his three-year term on September 4.
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RBI Governor Raghuram Rajan (centre) with Deputy Governors Urjit Patel, H R Khan during the press conference in Mumbai. While the markets are no longer too bullish on rate cuts now that Patel has been given the charge of RBI as opposed to other inflation “doves” – people presumed to be in favour of cutting rates who were seen as being in contention – it is a clear signal of the continuity of the Rajan regime.
Ironically, Rajan will be succeeded by a Deputy who went on to be known as his “inflation warrior” for steering one of the biggest reforms carried out by the RBI in recent history by changing its face to an inflation-targetting central bank.
At home, he is seen as carrying less political baggage than Rajan, which might help Patel in his dealings with Modi and Indian Minister of Finance Arun Jaitley.
The government is soon expected to announce the lineup of the six-member Monetary Policy Committee to decide on interest rates.
While Patel has been officially appointed RBI Governor with effect from September 4, his first working day will be two days later because of 4th being Sunday followed by a holiday for Ganesh Chaturthi on 5th.
Urjit Patel, Rajan’s lieutenant at the central bank who has now been named his successor, knows well that the banks’ reluctance is blunting transmission of monetary policy into the broader economy, even as the window of opportunity for even greater easing may be closing.
A version of this article appears in print on August 21, 2016 of The Himalayan Times.
With frequent detailing of the uneasy relationship between the RBI Governor with the Finance Ministry, Sharma said Patel’s expertise in fiscal policy will serve as a “bridge between RBI and Government”.
Patel is now a deputy governor at the RBI and will succeed Raghuram Rajan.
Rajan was an outspoken critic of the government’s management of social issues, particularly crony capitalism, police corruption and religious violence, which often resulted in tensions with conservative members of Modi’s ruling Bharatiya Janata Party (BJP).
Just as Patel’s announcement was made, Swamy took pot-shots at Rajan for allegedly continuing to hold US Green Card.
“As in the past, CII is committed to work closely with the Government and the RBI to support the creation of a stable, low inflation and high growth economy”, the CII statement said.
Under Raghuram Rajan, the Reserve Bank of India has cut lending rates 150 basis points (bps) since early a year ago, but banks have only lowered their rates by roughly half that and say they can only manage another 10-15 bps more in coming months.
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Some had anxious the government would try to pick a more pliable and political central banker for the role.
