While the outgoing RBI governor is known as somebody who openly took on the government’s critical reform initiatives in previous year or so, Patel is known as someone who has so far mainly stuck to his mandate and commented mostly on monetary policy-related issues.
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Ever since Rajan, in an unprecedented letter to his colleagues in June, said he was opting out of a second term at the helm of India’s central bank, speculation has been rife over who his successor would be – particularly given the outspoken nature of the incumbent and the eyebrows he raised.
He is a Ph.D (Economics) from Yale University (1990) and M. Phil. from Oxford (1986).
And the much coveted chair of RBI Governor, for the third largest economy of the world, goes to Urjit Patel.
AT the RBI, Patel headed the panel on Monetary Policy Framework, which, in January 2014, recommended that inflation should be the variable that should define the monetary policy framework. Congratulating Patel, Finance Minister Arun Jaitley in a tweet said, “I’m sure he will successfully lead the Reserve Bank and contribute to India’s economic development”.
Government is soon expected to announce composition of a six-member monetary policy committee to decide on interest rates.
In its reaction, Fitch Ratings said Patel’s appointment as the next RBI Governor signals a strong likelihood of policy continuity.
Since Urjit Patel has been elevated as the next RBI governor, the monetary policy department has to be looked after by any of the three deputy governors till the appointment of the fourth regular deputy governor. “Thus, Patel’s appointment is a surprise, because he is generally seen as hawkish, which may dash hopes of aggressive easing, and rightly so, in our view”, Nomura said.
Patel, now an RBI deputy governor, had been seen as among the more hawkish candidates that had been in the running to take over from Raghuram Rajan, who steps down as governor on September 4. In the past, Dr. Patel has also worked with several high level committees at state and Central government level.
The new governor takes over at a time when inflation has risen above that range.
The government appointed Patel as new governor on Saturday for a period of three years.
But here’s the interesting point: with Urjit Patel being elevated, the government actually has the opportunity to appoint a Deputy Governor in his place, and this means it could, if it wanted, have four people of its choice in the new MPC. It was also suggested that the governor should have a casting vote in case of a tie.
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Despite his sterling credentials, Rajan was made head of the central bank while the Congress Party was in government, and there were questions over the level of support he enjoyed once the Bharatiya Janata Party (BJP) took power.
