Rajan was also appointed for a period of three years, which has been the case for most Governors so far.Patel is the eighth Deputy Governor at RBI to be made Governor, the last being Y V Reddy.
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This ends weeks of speculation on who will succeed Rajan after he announced in June that he will not seek a second term. The new RBI governor is widely perceived as an inflation “hawk”.
As such traders expect Patel to keep the repo rate on hold at the RBI’s next policy review on October 4 after inflation accelerated to 6.07 percent in July, above the RBI’s near-term target of 5 percent. It was also Mr Patel who fixed the inflation target for containing inflation at 4 per cent give or take 2 per cent, and stipulated that if the RBI failed to meet this target it would have to give an explanation to the government for this. “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.
A close lieutenant of Rajan, Patel headed a committee that introduced landmark changes, including a switch to inflation-targeting and adopting consumer prices as the new benchmark instead of wholesale prices.
Minister of state for finance Santosh Kumar Gangwar said, “I believe Patel will take the economy in the right direction”. One of the RBI’s four deputy governors, Patel, 52, was reappointed in January for another three years.
Like Rajan, Patel has the International Monetary Fund on his CV, having worked at the Fund in the 1990s on desks including the US, Myanmar and India.
“He has to work freely because the RBI Governor has to work as autonomous body and has to work independently, that is how we have to take the country forward”.
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According to some senior officials at the Reserve Bank, Patel was particularly chosen by the International Monetary Fund in 1996-97 to provide advice on the development of the debt and currency markets in India, as also on banking and social security net reforms. “This is welcome and global investors will receive this very positively as continuity in policy formulation assures consistency and predictability of the Central Bank’s monetary stance”. “We are confident that RBI and the economy will gain tremendously from Dr Patel’s experience in both private and public sectors”, said Ficci’s President Harshavardhan Neotia. He holds a bachelor’s degree from the London School of Economics, a master’s from Oxford University and a doctorate from Yale.
