When RBI Governor Raghuram Rajan announced his decision of going back to academics, instead of seeking a second term in office, the BJP government at the centre found itself in a tight spot as it had to fill the huge vacuum that would be created by his exit. Rajan had set the bar really high in terms of his performance as the chief of the central bank and was widely accepted by fellow economists and policy makers. This made it even more difficult for the government as it had to appoint someone who could match up to Rajan’s credentials. However, after months of discussions, the government chose Urjit Patel, a deputy governor of the RBI for the past three years, as Rajan’s successor.
The government’s decision of appointing Urjit Patel was a clear indication of its keenness to continue with the current monetary policy and other macroeconomic policies.
It was a committee headed by Patel that decided to follow an inflation-targeting approach for setting interest rates, keeping consumer inflation as its base. The committee also recommended that the call on the monetary policy should be that of the committee and not the governor.
In terms of degrees, Patel is no less than Rajan. After graduating from the London School of Economics, he received his M.Phil degree from the Oxford University in 1986 and obtained his doctorate in economics from Yale University in 1990.
Between 1990 and 1995, he covered the US, India, Myanmar and Bahamas desks while working for the International Monetary Fund. Interestingly, he joined IMF as a Kenyan citizen as he was born in Kenya on October 28, 1963.
Talking about his technical publications and papers, he has dealt with subjects like public finance, Indian macroeconomic policies, international trade, public finance, the economics of climate change and financial intermediation in his works.
Prior to his stint as the deputy governor of RBI, he was an advisor to the Boston Consulting group and was also a non-resident fellow at The Brookings Institution. Apart from this, he has worked with Reliance Industries Ltd, IDFC Ltd and is also on the board of Gujarat State Petroleum Corporation Ltd. Patel’s exposure to the infrastructure sector, especially power and energy, could prove to be extremely beneficial for the RBI in dealing with loan defaults, NPAs and other held up projects.
Starting from the Narasimha Rao government, which undertook the great economic reforms of 1991, to the present government, Patel has played an important role in the country’s policy-making. He is credited with developing debt market, facilitating banking-insurance reforms and also for the transformations in the foreign exchange market in India.
The market and investors were not very enthusiastic about Patel’s elevation as RBI Governor for he is considered as an inflation hawk. However, they are optimistic about him being a little more flexible than Rajan in terms of lowering interest rates and other economic policies.