In Urjit Patel, Government Plumps for Continuity at the RBI

New Delhi: Ending months of speculation, Urjit Patel, a deputy governor at the Reserve Bank of India, was named by the government on Saturday as the next chief of India’s central bank. He will succeed the outspoken Raghuram Rajan, whose tenure was marked by tough measures to control inflation and headline-making statements.

52-year-old Patel, who has been overseeing the monetary policy department at the RBI under Rajan and has been known as his ‘inflation-warrior’, will have a three-year term, an official statement said here.

Having worked with the International Monetary Fund, the US management consulting firm Boston Consulting Group and Reliance Industries among other organisations, Patel will take over after Rajan completes his three-year term on September 4.

He will be among the few with a corporate background to become RBI governor, the top post at Mint Street that has been previously held mostly by career bureaucrats or economists at academic institutions.

While Rajan’s exit has been seen in many quarters as driven by his often candid views against various policies of the government, Patel’s appointment as the 24th RBI governor may end up ensuring continuity of the monetary policy of the current governor.

Rajan, who went on to earn a reputation of being an outspoken critic on various economic and even non-economic issues, was under attack in recent months from some quarters including BJP MP Subramanian Swamy for what they termed as his priority on inflation control at the cost of growth.

The 53-year-old Rajan would end up among those with the shortest tenure as RBI governor.

Indeed, Rajan will be the first governor since 1992 to not have a five year term. His predecessors – D. Subbarao (2008-2013), Y.V. Reddy (2003-2008), Bimal Jalan (1997-2003) and C. Rangarajan (1992-1997) – all had five-year terms.

Ironically, it was Patel who headed a committee on monetary policy reforms that suggested a medium-term target on inflation and a glide-path to achieve the number. It was this report that led to the signing of an agreement on inflation targeting between the government and the central bank.

A doctorate in Economics from Yale and an M Phil from Oxford, Patel was appointed to the the RBI as deputy governor by the Manmohan Singh government on January 11, 2013 and was given a second term in January this year. He has been the key architect of the bank’s inflation target and rate-setting panel.

A close lieutenant to Rajan, his appointment is widely seen as ensuring continuity in policy and reforms initiated since 2013.

Patel’s appointment comes at a time when inflation has breached the 6% top range set by the government. He would also have to follow through on Rajan’s efforts to clean-up non-performing assets at public-sector banks.

He was with International Monetary Fund (IMF) between 1990 and 1995 and worked on the US, India, Bahamas and Myanmar desks.

Rajan, who has been credited with helping navigate the Indian economy through tough times, had in June surprised economists when he said he would return to academia and not seek a second term.

Banking sector reforms, halving the inflation rate and getting the government to target inflation at 4% were other achievements of Rajan.

The renowned economist had also won plaudits for helping arrest the rupee’s decline against the dollar and promoting price stability, but his focus on arresting inflation by not cutting interest rates also led to bitter criticism from politicians, particularly BJP MP Subramanian Swamy.

Just as Patel’s announcement was made, Swamy took potshots at Rajan for allegedly continuing to hold a US green card.

When one of his followers said Patel is a Kenyan national, Swamy tweeted: “He is not Kenyan citizen but was. [Rajan] was born Indian and chose to continue his US green card even though in India from 2007.”

The RBI had in June stated that Rajan is an Indian national and an Indian passport holder.

When another follower asked if Patel would be hawkish as Rajan, Swamy tweeted: “Don’t be an idiot like the presstitutes,” using the derogatory term that BJP leaders have popularised to attack the media.

Patel is the eighth deputy governor in the Reserve Bank’s history to be made its governor and the sixth with an experience at the IMF.

On deputation from the IMF in 1996-97, he worked at the Reserve Bank of India, before becoming a consultant (1998 -2001) to the ministry of finance.

Some of his previous assignments include, president (business development), Reliance Industries Ltd.; executive director and member of the management committee, IDFC (1997-2006); member of the integrated energy policy committee (2004-2006) and board member of the Gujarat State Petroleum Corporation Ltd.

Between 2000 and 2004, Patel worked closely with several central and state high-level committees, such as the task force on direct taxes at the Union finance ministry, the advisory committee (on research projects and market studies), Competition Commission of India, the secretariat for the PrimeMinister s task force on infrastructure, Group of Ministers on telecom matters, the committee on civil aviation reforms, the ministry of power’s expert group on state electricity boards and the high level expert group for reviewing the civil and defence services pension system.

Patel has authored technical publications, papers and comments in the areas of Indian macroeconomics, public finance, infrastructure, financial intermediation, international trade and the economics of climate change.

Reactions

Finance minister Arun Jaitley exuded confidence that Urjit Patel would contribute to India’s economic development as the next Reserve Bank governor. “I’m sure he will successfully lead the Reserve Bank and contribute to India’s economic development,” Jaitley tweeted while congratulating Patel.

Urjit Patel will bring “great continuity” at the central bank, his fellow deputy governor S.S. Mundra said, describing him as “a man of clear opinion who may bring some changes”.

“We all are very happy. Being a colleague, he brings great continuity and familiarity. He has a clear understanding of what is going on,” Mundhra said.

Welcoming the appointment, SBI Chairman Arundhati Bhattacharya said: “Patel has been at the helm of institutionalising the inflation targeting regime in the monetary policy framework. His appointment signals continuity of policy intent, both on part of RBI and the government.”

Bhattacharya was one among the seven names speculated to succeed Rajan as the 24th Governor.

Former RBI deputy governor K C Chakrabarty stressed on the need for continuity in the central bank’s policies.

Recently, Rajan said there are several unfinished tasks.

“It’s the best that has happened. He is competent and he will be able to deliver,” Chakrabarty said, adding that Patel having worked in the system understands the environment, circumstances and policy measures “much better”.

In his comments on the appointment, former advisor to erstwhile Planning Commission Pronab Sen said “this is indicative of continuity. International investors will like that”.

The Congress, meanwhile took a swipe at the Modi government over Patel’s appointment, saying the governor-designate has the same “pedigree” as Raghuram Rajan, whom the government did not give a second term.

“If establishment hounds abhorred Raghuram Rajan’s foreign credentials, Urjit Patel has identical pedigree. Different strokes for different folks,” Congress leader Manish Tewari said in a tweet.

The Congress leader was apparently referring to Patel being born in Kenya and BJP MP Subramanian Swamy’s repeated digs at Rajan for retaining his US green card despite becoming RBI Governor.