The choice of Dr. Urjit Patel an eminent economist, consultant and banker as the 24th governor of the Reserve Bank of India reflects the government’s preference for continuity to the Raghuram Rajan’s tradition and is a step in the right direction.
Dr. Patel, working closely with Dr. Rajan, is piloting India’s transition to a new monetary policy regime. He is the senior-most Deputy Governor at the RBI and the architect of the new monetary policy framework. Dr Patel is working closely with the Cabinet Secretariat and the Finance Ministry to ensure a smooth transition.
No doubt, Patel will have to face number of challenges ranging from reining in inflation to managing currency volatility but looking to his profound vision about global economy, and extraordinary intellectual power about understanding the financial problems in India, he will continue the good job done by his predecessor Raghuram Rajan in containing inflation and reducing the interest rates. In other words, pressure will remain on Rajan’s replacement to cut rates even more. His appointment as Governor will also come as a relief to International investors.
He is the architect of inflation targeting approach. Being the man who has seen RBI’s policies and framework, it is expected that his decisions regarding interest rates, monetary policy, cleaning the NPAs of banks, etc., will be balanced keeping in mind the circumstances prevailing from time to time.
During his tenure at the RBI, Dr. Patel was seen as a close standby to Rajan. Even as the Deputy Governor of RBI, Patel an abrasive personality, has played a vital role in developing the new monetary policy framework that has focused on reigning in inflation and has imparted stability to the currency. The changes he helped impel are considered to be among the most momentous monetary policy reforms.
His appointment would ensure a smooth transition and continuity in monetary policy. The challenge he will have to face is the mounting bad debt of the country’s government-owned banks. Patel understands the circumstance very well as he is a fantastic professional, competent and will be able to deliver. However, he will also have to navigate India’s tricky political scene.
It is said that that Patel is a strict fiscal disciplinarian, known as “inflation warrior” of Rajan and he is the “right man” to succeed Dr Rajan. He will certainly bring down inflation within the accepted limit so that the growth can be on the basis of solid economic foundation in the long run. What people expect is that besides controlling inflation, Dr Patel will have to follow through on the efforts to clean up banks’ bad loans to support the investments needed and to keep our country as one of the world’s fastest growing economies.
Vinod Chandrashekhar Dixit
(The views expressed by the author in the article are his/her own.)