RBI’s Deputy Governor Urjit Patel was today appointed as the next Governor of the central bank after Raghuram Rajan demits office on September 4. His predecessor and former boss at the central bank, Raghuram Rajan, was eminent at home and overseas, and set a high standard for talking truth to power – which could explain why he won’t be serving a second three-year term. “It will assure worldwide investors that the flexible inflation targeting framework will be taken to its logical end and it’s absolutely essential for India’s monetary policy credibility”. He has also worked as a consultant to the Ministry of Finance. Minister of State for Finance Santosh Kumar Gangwar hoped that Patel will do well as the RBI governor. “This may see the market move some of the rate cuts further along the curve”, said Vaninder Singh, Asia economist at RBS.
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“The new governor needs to reinforce the faith that the external world and Indian markets have in the … central bank”, said Mihir Vora, Chief Investment Officer of Max life insurance.
The appointment of Urjit Patel as the next RBI Governor signals government’s preference for policy continuity and commitment to low inflation, says Japanese financial services major Nomura. Investors expect another interest rate increase in the USA, which will lift yields on dollar-denominated assets and cause aftershocks in emerging markets like India. Raghuram Rajan his successor has been most appreciated for controlling inflation.
“And second, his experience as a deputy governor in charge of monetary policy under the governorship of Rajan will hold him in good stead”.
Suggesting an agenda for the new Governor of RBI is both improper and pompous given that the person chosen to head the central bank is an accomplished person from the system who knows what to do and does not require any advice.
Patel was a key architect of a switch to using consumer prices instead of wholesale prices to measure inflation, believing them a better gauge of volatile price changes.
Till the government appoints a replacement for Patel as the deputy governor, it will have to appoint one among the three DG – R Gandhi, SS Mundra and NS Vishwanathan – to oversee the critical monetary policy aspect in the interim. “We will be looking out for his stance [at the next rate-setting meeting] in October”, she said.
Patel on the other hand has maintained a low profile throughout his years at the RBI, and is expected to keep a quieter style of communication, Nomura said.
Patel, who has a doctorate from Yale, will take over on September 4.
The BJP lawmaker Subramanian Swamy has called 53-year-old Rajan “mentally not fully Indian” and told him to “go back to Chicago” where he used to be a finance professor.
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I would like Patel to focus on several issues allowing cooperative banks to collect tax from their members and deposit to the government through HDFC bank as before. Meanwhile, good buying was observed in selected metal stocks as India has slapped anti-dumping duty on certain cold-rolled flat steel products from four nations including China and South Korea to guard domestic industry from cheap imports. This also led to selling by foreign funds with the BSE data showing a net FPI outflow of Rs 300 crore.In the forex market, the rupee too took a dip with the Indian currency closing 13 paise weaker at 67.19 to a dollar compared to 67.06 on Friday.
