His predecessor, Raghuram Rajan, announced in June that he would step down as RBI governor, setting off a wave of speculation over the circumstances of his departure and the future of India’s economy.
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In exactly two weeks, when Urjit Patel takes over as the next governor of the Reserve Bank of India (RBI), he will, literally, have to start from the word go.
RBIs Deputy Governor Urjit Patel was today appointed as the next Governor of the central bank after Raghuram Rajan demits office on September 4.
To add to it, he also has experience of working with International Monetary Fund between 1990 and 1995 where he covered the US, India, Bahamas and Myanmar desks.
On inflation, investors expect Patel to hold interest rates at the RBI’s next policy review on October 4 after consumer inflation accelerated to 6.07 percent in July, the fourth consecutive month above the RBI’s near-term target of 5 percent.
Patel is the architect of a report submitted in January 2014, which first recommended that retail inflation should serve as a nominal anchor for the country’s monetary policy framework.
Mr Patel, now deputy governor, is a one-time Yale University economist who worked at the International Monetary Fund (IMF) in the early 1990s. “He is familiar with the situation and has a great understanding of the economy and there is absolutely no doubt that things will be handled extremely well”.
The elevation of Urjit Patel as the Governor amid a small window to operationalise the new Monetary Policy Committee (MPC) framework has brought a slew of challenges for the Reserve Bank. The RBI governor and deputy governor in charge of monetary policy will be ex officio members and the governor will have casting vote in case of a tie.
“We view the appointment positively, he should ensure a smooth transition, policy continuity, and provide a favourable environment for RBI to build on the good progress in the last three years,”said Commerzbank in its daily market report”.
Mr Patel’s selection comes against the backdrop of efforts by the Centre and the RBI to contain inflation at the minimum levels possible and it is here that his well-earned sobriquet of “inflation warrior” may come in handy.
The announcement of his appointment as the new Governor of the central bank was made on Saturday, 20 August 2016.
Moody’s Investors Service said it would monitor for transmission of monetary policy and the clean-up of bad debt in the banking sector.
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“The government’s decision to promote the existing RBI deputy governor signals its preference for policy continuity and commitment to low inflation, and it is a move that will be seen as protecting the RBI’s independence”, it said. He has run the central bank’s monetary policy department since 2013 and has worked closely with Rajan during his term at the bank.
