“There could be some knee-jerk sell-off in bond markets as the euphoria of extensive monetary easing moderates”, Samiran Chakraborty, chief economist Citi India, said, commenting on the appointment of the new governor. He is now holding the post of deputy governor of RBI.
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As deputy governor, Patel headed the RBI panel to draft the monetary policy report, which became the basis of the ongoing reforms at the apex bank.
While Patel is described as the chief architect of the report on the monetary policy framework, it must be noted that the new framework also has a lot of imprint of the incumbent governor Raghuram Rajan, who believes that high inflation and high growth can not co-exist.
The appointment of Urjit Patel as 24th Governor of the Reserve Bank will ensure continuity of policy as he has been incharge of the monetary policy, RBI Deputy Governor S S Mundra said on August 23.
‘Nevertheless, some of the dovish sentiment that had crept into the market will likely be re-priced given that Dr Patel is viewed as being more hawkish, therefore yields could correct slightly higher in the near term’. “Even though he is less experienced, I think he will do the job well”.
“Institutional investors both domestic and foreign would welcome the appointment of Patel as successor to Rajan”.
He also caused ripples in the corridors of power with his outspokenness, including warning against intolerance, saying it could impact growth at a time when Prime Minister Narendra Modi’s government was under fire for failing to rein in right-wing groups. “By appointing Urjit Patel, the government has selected a candidate who can fit into the large shoes of Raghuram Rajan”.
“He (Patel) will hopefully control inflation rate since he has experience of monetary policy”, minister of state for finance Arjun Ram Meghwal told reporters on Monday.
“His appointment makes sense”.
“It will assure worldwide investors that the flexible inflation targeting framework will be taken to its logical end, and it’s absolutely essential for India’s monetary policy credibility”.
He has previously served the International Monetary Fund (IMF) in the US, India, Bahamas and Myanmar. He was also a consultant to the ministry of finance between 1998 to 2001. This apart, he has been a non-resident Senior Fellow of The Brookings Institution.
That may require a consensus-builder, in the mould of central banks in developed markets such as the US Federal Reserve.
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“He has an abrasive personality”, said one RBI official who has worked with him.
