“Urjit Patel’s appointment as the next RBI governor signals a strong likelihood of policy continuity”, Rookmaaker wrote.
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“It’s a continuation of Mr. Rajan’s regime”, said Madhavi Arora, economist at Kotak Mahindra Bank Ltd.
Urjit Patel was first appointed as deputy governor on January 11, 2013 and on January 8, 2016, his three-year term was extended by further three years.
The controversy surrounding Mr Rajan’s decision to go back to academia after his term expires on September 4, had unsettled investors both domestically and internationally.
Rajan, who succeeded in halving inflation rate from double digit levels prevailing when he took over, also persuaded government to adopt inflation targeting, setting a medium term central target of four per cent, within a range of two to six per cent – another policy endorsed by Patel.
Monetary Policy committee (MPC) which is in the making will decide the monetary policy by consensus and not just lay the powers with the Governor, who can use veto power only in case of a tie.
Patel is the eighth Deputy Governor at RBI to be made Governor, the last being YV Reddy.
New DelhiI: Suspense over the new Governor of the Reserve Bank of India (RBI) is over.
The government will also have to finish the work of nominating its members by September 15. Industry body Federation of Indian Chambers of Commerce and Industry (Ficci) credited Patel with being the architect of the current monetary policy stance.
His successor – who is a Ph.D in economics from Yale and M.Phil from Oxford – was clinched on Thursday at a meeting between Prime Minister Modi and Finance Minister Arun Jaitley, the sources said.
He was on deputation (1996-1997) from the IMF to the RBI and provided advice on development of the debt market, banking sector reforms, pension fund reforms, real exchange rate targeting and evolution of the foreign exchange market. However, in 2004, Patel along with others in the top management resigned protesting against then finance minister Jaswant Singh’s proposal to handover the institution to State Bank of India.
That may require a consensus-builder, in the mould of central banks in developed markets such as the US Federal Reserve.
Moody’s Investors Service and Fitch Ratings said on Sunday the appointment of Patel signalled continuity for the RBI’s policies.
Back home, the Goods and Services Tax now being a reality, the impact of its rate on price inflation is the biggest challenge for the government, and must be so for the new RBI governor as well.
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Still, analysts, say they still see scope for an interest rate cut at the end of this year or early in 2017 should food prices moderate in coming months as monsoon rains have been above average.
