keeping grip on inflation, helping banks in strengthening their balance sheets and bringing in regulations that will ensure the stability of the financial system will be the challenges before the new governor.
Ending two months of intense speculation, the Union government on Saturday appointed Urijit Patel as the 24th governor of Reserve Bank of India (RBI) for a period of three years. Patel, seen as a close aide of outgoing governor Raghuram Rajan and deputy governor in charge of monetary policy, will assume office on September 5, a day after Rajan’s term ends. He will be one among the few governors – after Manmohan Singh and Raghuram Rajan – to be appointed to the top post from outside the IAS circle.
How did the scales tilt in favour of Urijit Patel when there were equally qualified experts like Arvind Subramanian, chief economic advisor, or Shantikanta Das, economic affairs secretary? Was he handpicked by Prime Minister Narendra Modi himself? Of course, opinion among economists, bankers and other stake-holders are divided on these counts, though most experts opine that probably the government wanted a continuity in the monetary policies and didn't want any disruptions by bringing in a new candidate.
The challenges before the new governor, however, would be to continuing to keep his grip on inflation, helping banks in strengthening their balance sheets and bringing in regulations that will ensure the stability of the financial system. Many believe that 53-year-old Patel's prime focus will be to keep the galloping inflation under control though a granular surveillance on the interest rates. Urijit Patel, deputy governor since January 2013, has been a key figure in framing the monetary-policy framework that set food price inflation as the target for tackling inflation rather than focus on whole sale price inflation, which gave more weightage to industrial production.
Arundhati Bhattacharya, chairman, SBI said, “Dr. Patel has been at the helm of instiutionalising the inflation targeting regime in the monetary policy framework. His appointment signals continuity of policy intent both on the part of RBI and the government.”
The six-member rate setting committee will be set up shortly after the government appoints its three members. In the new role, Urijit Patel will have the flexibility to implement the policies on inflation and interest rates that he helped to formulate. And he takes over at a time when retail inflation and the whole sale inflation have both overshot expectations at 6.07% and 3.55% respectively.
Ashutosh Khajuria, executive director, Federal bank said, “Patel is seen as Rajan’s lieutenant and the government wants to see continuity. It was his paper on monetary policy recommendations that set CPI as inflation target and the government has notified a 4% medium-term inflation target (with tolerance levels plus or minus 2%) has now become a legislation endorsed by the parliament. So his credentials as a economic policy expert is impeccable.”
Chanda Kochhar, MD and CEO, ICICI Bank said, “His appointment would ensure a smooth transition and continuity in monetary policy, as India puts in place major structural reforms to transition to a higher growth path.”
Patel, who completed his graduation programme from the London school of economics, has an MPhil from Oxford University and a doctorate in Economics from Yale university (1990). His previous assignment included terms with the International Monetary Fund (IMF), the Brookings Institution at Washington and the Massachusetts-based Boston Consulting Group and Reliance Industries and non-executive director of the multi-commodity Exchange of India Ltd.
Patel will contribute to India's growth story: Jaitley
Finance minister Arun Jaitley exuded confidence that Urjit Patel will contribute to India's economic development as the next Reserve Bank governor. “I'm sure he will successfully lead the Reserve Bank & contribute to India's economic development,” Jaitley tweeted congratulating Patel.
It'll be idiotic to attack Patel: Subramanian Swamy
Urjit Patel's appointment appeared to have support of BJP MP Subramanian Swamy who had launched a series of attacks against the outgoing governor Raghuram Rajan. In a string of retweets and replies to his Twitter followers, Swamy said it will be utter “idiotic” to think he will attack Patel because he was born in Kenya.
When one of his followers criticised Patel for being a Kenyan national, Swamy replied: “He is not a Kenyan citizen, but was. R3 was born Indian and chose to continue his US green card even though in India from 2007.” R3 is the acronym he uses for referring to Raghuram Rajan.
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