Urjit Patel, the new RBI governor, has worked closely with Raghuram Rajan and is often seen as his confidante.
Raghuram Rajan once famously said, “I am Raghuram Rajan and I do what I do.” If we were to improvise on the outgoing RBI governor’s words, Rajan would now say, “He is Urjit Patel, and he will do what I did.” With the appointment of Urjit Patel as the new RBI governor, the Narendra Modi government seems to have wanted and ensured precisely this! Patel, who takes over from Rajan after the latter’s term ends in September, is presently a deputy governor at the RBI. He has worked closely with Rajan and is often seen as his confidante. This adds to the conviction that Patel, as RBI governor, will ensure continuity of Rajan’s policies.
So what all are the similarities between Patel and Rajan? Inflation warrior – check, worked with governments in the past – check, has been an IMF economist – check, has global academic credentials – check. Call him ‘inflation hawk’ or ‘inflation warrior’, the fact is that Patel is known to be someone, who like Rajan is committed to RBI’s biggest goal of keeping prices in check. Patel takes over as the RBI governor at a time when the central bank and government have agreed on a 4% (+/-2%) target for inflation.
Incidentally, it is Patel who is the man behind RBI’s new Monetary Policy Committee (MPC) framework and inflation targeting approach. In that sense, he would also be on the same page as the government on the new MPC and is likely to find it easier to slip into the role. The new MPC takes the decision of setting key interest rates from solely the hands of the RBI head to a committee of experts, of which the governor is obviously a part. Patel is also credited for changing RBI’s monetary policy focus from wholesale prices (WPI inflation) to consumer prices (CPI), an approach that has been praised by Rajan.
Additionally, it appears that both Patel and Rajan are also focused on the transmission of monetary policy. Patel in a recent paper titled ‘Challenges of Effective Monetary Policy in Emerging Economies’ had said, “The central bank should perhaps re-balance the reform agenda from high profile subjects such as legislative amendments, like a monetary policy framework and associated institutional changes, to addressing policy-induced distortions that undermine monetary policy efficacy and transmission.” This is something that Rajan has been stressing on time and again, especially with respect to rate cut transmission by banks.
Before taking over as the Deputy Governor of RBI in 2013, Patel was Advisor (Energy & Infrastructure) at The Boston Consulting Group. Patel is a PhD in Economics from Yale University and an MPhil from Oxford. During 1996 to 1997, Patel was on deputation from the IMF to RBI. According to his profile on the RBI website, Patel provided advice on development of the debt market, banking sector reforms, pension fund reforms, real exchange rate targeting and evolution of the foreign exchange market. He was also Consultant to the Finance Ministry from 1998-2001. He has also worked with Reliance Industries and Infrastructure Development Finance Company Limited (IDFC) in the past.
Patel’s job is by no means easy, especially given the star status and the global credibility that his predecessor Rajan managed to attain. Urjit means strength, power, valour, excellent, and is even a form of Lord Vishnu. We can only hope that Urjit Patel exhibits these qualities and guides the economy in the right direction, to take it to still newer highs.