The Indian government bonds slumped Tuesday following the appointment of hawkish Urjit Patel as the new governor of the Reserve Bank of India, with effect from September 4. He will replace the present RBI Governor Dr. Raghuram Rajan.
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“From that perspective, this would be work in progress. So, it would be reasonable to expect that there would a continuity”, he said.
Indian equity markets are likely to open higher on Monday after the government announced Urijit Patel as next Governor of Reserve Bank of India.
Having worked with the International Monetary Fund, Boston Consulting Group and Reliance Industries among other organisations, Patel will take over after Rajan completes his three-year stint on September 4.
Aside from controlling inflation, the new governor will have to follow through on efforts to clean up banks’ bad loans so that they can once again support the investments needed if India is to keep its place as one of the world’s fastest-growing economies.
Patel, who has a doctorate from Yale, had widely been seen as ensuring the most continuity among the candidates believed to be in the running to be the next governor.
“Urjit Patel’s appointment as the next RBI governor signals a strong likelihood of policy continuity”, Rookmaaker wrote. Patel has also been guiding the monetary policy as the deputy governor for the past three and a half years after he succeeded Subir Gokarn. Investors will be keenly watching US Fed chair Janet Yellen’s speech at the Jackson Hole Symposium for the central bank’s view on economic conditions in the US.
SBI Chairman Arundhati Bhattacharya said, “Patel has been at the helm of institutionalising the inflation targeting regime in the monetary policy framework”.
A notification was issued by the government on August 6 on monetary policy.
His tweets led to his followers proclaiming that he was backing Patel’s appointment.
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. Mr Patel is close to Mr Rajan who appointed him on various committees that prepared reports on the transformation of the RBI. He also served at the International Monetary Fund where he covered the US, India, Bahamas and Myanmar desks before joining RBI.
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But although interest rates are at their lowest level since 2011, there have been tensions with the ruling Bharatiya Janata Party (BJP) which has been pushing for deeper cuts, saying these would boost growth further. The members of MPC will be appointed for period of four years and can not be re-appointed.
