In a surprise move, the Indian government over the weekend appointed Urjit Patel, now the deputy governor of the Reserve Bank of India, to succeed Raghuram Rajan as the next RBI governor when his term ends on September 4.
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The appointment of Urjit Patel as the next Reserve Bank of India’s (RBI) governor signals policy continuity, although there is no immediate impact on sovereign ratings, credit rating agencies said on August21.
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.
This makes it seem that in Patel, the Modi government found a central bank chief who will continue Rajan’s policies and plans on interest rates and inflation. Mr Patel himself is known as an “inflation warrior”, and brings with him valuable experience that includes stints with the corporate sector besides his work at the International Monetary Fund like his predecessor. The Patel committee report also formed the basis of the monetary policy committee, which takes away a lot of powers of RBI and the governor, as also move to create a public debt management agency.
“Patel’s selection is a vote of confidence by the government in the monetary policy initiatives started by Raghuram Rajan”, he told AFP.
The new governor takes over at a time when inflation has risen above that range. “He will also keep in mind the requirements of growth which is a mandate of the Reserve Bank of India Act”, Economic Affairs Secretary Shaktikanta Das said. From the RBI’s quota of three, two will be the governor and the deputy governor in-charge of monetary policy, while a third one has to be recommended by the RBI board.
Patel is one of the chief architects of India’s monetary policy framework.
A soft-spoken person of Gujarati origin who has kept a low profile throughout his term at RBI, Patel was first given a three year term as Deputy Governor and got an extension this January.
Between 2000 and 2004, Patel had worked with several Central and State government committees such as the Task Force on Direct Taxes, the Ministry of Finance, and the Secretariat for the Prime Minister’s Task Force on Infrastructure.
Dr Patel also has corporate experience under this belt.
AS MUCH as the financial markets they seek to influence, central banks need the confidence of investors to function. CPI (Consumer Price Index)-based price gains accelerated to 6.07 per cent in July.
Not many market participants expect a rate cut in the October policy meeting as retail inflation is higher than the central bank’s March 2017 target of 5 per cent.
“It’s a continuation of Mr. Rajan’s regime”, said Madhavi Arora, economist at Kotak Mahindra Bank Ltd.
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Further, it said that the Patel’s appointment was surprising because “he is generally viewed as hawkish, which may dash hopes of aggressive easing, and rightly so, in our view”.
