New Delhi, Aug 22 The government today hoped that Governor-designate Urjit Patel will “rise to the occasion” and use his experience of handling monetary policy at RBI to maintain a balance between inflation and economic growth. The rupee fell 13 paise, or 0.19 per cent, to close at 67.19 to a dollar.
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“Second thing is, in his present role as deputy governor RBI, he is incharge of monetary policy, which was already the centre-stage of inflation…interest rate-related activity or Monetary policy related activity”, he said on the sideline of an event organised by CII here.
The government on Saturday appointed Deputy Governor Patel as the 24th head of the Reserve Bank.
53-year-old Rajan, who was among the youngest to become RBI Governor three years ago, earned a reputation of fighting inflation that also led to criticism by some quarters including by BJP MP Subramanian Swamy, but it was Patel who was known as the “inflation warrior” of the former IMF Chief Economist during his tenure at the Mint Street. “While Patel is new as a Governor, he’s not new for RBI”.
Equity markets also ended lower on Monday with banking stocks coming under pressure as the new governor is expected to pursue to completion the clean up of banks’ bad loans.
“Notably, as a Deputy Governor Dr. Patel has only occasionally aired his views in public”. Besides, at least five former Governors had served at International Monetary Fund before becoming RBI chief, while a few others went on to work at International Monetary Fund after leaving the central bank.
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. Over the same period, foreign portfolio investors have net bought $5.85 billion of equities and net sold $1.10 billion of debt instruments.The 10-year benchmark bond too fell on Monday, with yields expanding as much as 5 basis points.
Prime Minister Narendra Modi’s government this month formally agreed to adopt Rajan’s inflation target of 2 to 6 percent in the medium term.
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Another signal that goes out with this appointment is that the government is not, and will not be pushing for a dovish monetary policy (lower interest rates) and is not looking for a quick fix approach to the economy. “We see continuation of the polices as a positive trigger for the market”, said Jimeet Modi, CEO, SAMCO securities.
