JOIN USUrjit Patel to succeed Rajan as RBI governor
Urjit R Patel will take over as the 24th governor of the Reserve Bank of India (RBI) when incumbent Raghuram Rajan demits office in the first week of September.
Patel, currently serving as the deputy governor of the RBI, will hold the post for three years, starting September 4.
The Appointments Commitee of the Cabinet has approved Patel’s appointment, the government said on Saturday.
Patel’s appointment signalled that Prime Minister Narendra Modi is in favour of a smooth transition at the RBI and continuation of Rajan’s unfinished agenda to contain inflation as well as boost growth, economic analysts and finance ministry officials said.
Seen as one of Rajan’s close lieutenants, Patel (52) will now get to implement the monetary policies of which he was a key architect. Patel, like Rajan, is rated as a strict fiscal disciplinarian, who wants to bring down inflation within the accepted limit so that the growth can be on the basis of solid economic foundation in the long run, officials said.
Patel takes over at a time when consumer inflation accelerated to 6.07% in July, the fourth consecutive month it has stayed above the RBI’s near-term target of 5%.
Recently, the finance ministry notified the consumer inflation target for the RBI until March 31, 2021, with an upper tolerance level of 6% and lower limit of 2%. In fact, in January 2014, Patel headed the committee that suggested that the RBI should target consumer price index and not wholesale price index. It also said the RBI should try to contain inflation at the 4% mark (with a standard deviation of 2%). This prepared the ground for setting up the Monetary Policy Committee that will set interest rates in keeping with this target.
Modi, in his Independence Day speech, said that “we have made an agreement with the RBI that it should take steps to control inflation at the level of 4% with an allowance of plus minus 2”.
Patel holds a doctorate in Economics from Yale and an MPhil from Oxford.
He was an adviser with Boston Consulting Group and Reliance Industries before his appointment as the RBI deputy governor in 2013.
Patel was given a three-year extension as deputy governor in January this year. In 1991, Patel was the representative of the International Monetary Fund in India when the country had gone for a huge borrowing from IMF.
He provided advice on the development of the debt market, banking sector reforms, pension fund reforms, real exchange rate targeting and evolution of the foreign exchange market.
Patel was picked for the top post from among top contenders, including former deputy governor Subir Gokarn, who is currently an executive director at the IMF.
Others in the fray included World Bank Chief Economist Kaushik Basu, Economic Affairs Secretary Shaktikanta Das, SBI chief Arundhati Bhattacharya and Finance Ministry's Chief Economic Advisor Arvind Subramanian.
In June, Rajan decided not to seek a second term following attacks by BJP MP Subramanian Swamy, which were denounced by Finance Minister Arun Jaitley, and later by Modi.
The government is expected to announce the composition of a six-member monetary policy committee to decide on interest rates.
It will be made up of Patel and two other RBI officials, along with three members appointed by the government.
Smooth transition
Like Rajan, Patel is said to be a strict fiscal disciplinarian
Appointment signals continuation of Rajan’s unfinished agenda to contain inflation, boost growth
Patel headed panel that suggested RBI should target consumer price index
Panel also held that RBI should rein in inflation around 4% mark, withstandard deviation of 2%
Headed a committee that recommended monetary policy framework, based on which RBI would function
This prepared ground for setting up Monetary Policy Committee (MPC) that will set interest rates
MPC will now comprise Patel, two RBI officials and three members appointed by govt
Was adviser to Boston Consulting Group and Reliance Industries before being made RBI deputy
governor in 2013