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”.
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Patel was one of the deputy governors of the Reserve Bank of India (RBI) and the chief strategist and lieutenant of Rajan in the battle against inflation in the last three years. Though it had recommended a five-member committee where three members would be from RBI and two external members would be appointed by the RBI governor and the deputy governor in-charge. And lastly, cooperative banks should not be converted into private entities.
When talking about this challenge for Urjit Patel as the RBI Governor, it should also be kepte in mind that his moorings are as monetarist as the outgoing Governor, and he is considered to attach the same importance to inflation control as Raghuram Rajan.
The Ministry of Finance said, “He will replace the present RBI Governor Dr. Raghuram Rajan”.
The government has set an inflation target of 4 per cent, plus or minus 2 per cent, while consumer price inflation soared to 6.07 per cent in July.
RBI’s next monetary policy review is scheduled on October 4.
Patel worked closely with several central and state government committees – especially those on direct taxes, market studies, anti-trust laws, Prime Minister’s Task Force on Infrastructure and sectors like telecom, aviation, power and pensions.
Dr Patel is presently the Deputy Governor of RBI and is holding this assignment since 2013.
The MPC aims at shifting the decision-making process from the current system which gives discretion to the Governor, to a panel-based approach where every member’s call will count and the governor will have a casting vote.
Its collateral benefits besides lower inflation will include stable currency and higher real interest rates, he had said.
Founder, MD and CEO Yes Bank, Rana Kapoor, in a statement said it is an outstanding choice for very many reasons.
So Patel was aptly suited for the top post at the Central Bank given his academic and professional credentials. “What is clear is that persistence of elevated inflation is agreeable to some policy makers”.
Patel – who is a Ph.D in economics from Yale and M.Phil from Oxford – has had a mix of stints with multilateral institutions, bureaucracy, central bank, global consultancies and even private companies.
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The government will constitute the monetary policy committee (MPC) in line with the new framework. Rajan in his monetary policy review earlier in the month had said: Reserve Bank will continue with both domestic liquidity operations and foreign exchange interventions that should also enable management of the FCNR (B) redemptions without market disruptions.
