NEW DELHI: Ending months of speculation, the government on Saturday appointed Urjit R Patel as the governor of the Reserve Bank of India. Patel is currently one of the four deputy governors at the central bank.
According to sources, more than one factor worked in favour of Patel's appointment. One, he was part of outgoing governor, Raghuram Rajan's team and can ensure continuity. And two, belief in his capability to work with the government. Also, Patel is expected not to be as ‘outspoken’ as Rajan, a trait that soured relations between him and the government. “Many in the government feel it is important to align the monetary and fiscal policies for a sustained economic growth,” said a source. “Patel being an insider, perhaps knows how best to work with the government, be it on interest rates or NPAs.” Rajan and the government were not on the same page on cutting the key rates and on the benchmark for declaring non-performing assets.
Patel was also part of many landmark decisions, especially on monetary policy. It was a committee headed by Patel that suggested major reforms to the monetary policy. The creation of a panel to set interest rates and a shift to inflation-targeting approach were the major decisions made by the committee. Seen as a close confidante of Rajan, Patel will now get to implement the policies he helped shape. Experts believe his first priority would be to bring down inflation and keep prices under check. Under the new framework of the monetary policy, Patel will be the first governor to oversee interest rate decisions. The RBI and the government have set a retail inflation target of 4 per cent for the next five years.
“Patel has been at the helm of institutionalising inflation targeting regime. His appointment signals continuity of policy intent,” said SBI chairperson Arundhati Bhattacharya, who herself was a candidate for the top post. Patel has a massive job ahead of him. Besides taming inflation, he will have to continue the efforts initiated to clean up bad loans. This will be the key to supporting further investments and sustaining India's economic growth.