The Government ended all the speculation by appointing Dr Urjit R Patel as the next Governor of RBI who will succeed our rock star Governor Raghuram Rajan. In this crucial juncture of economy where most of the analysts (and the entire country) would have loved to see Raghuram continuing his second term, Urjit Patel was an obvious pick among all the probable choices. I support his appointment on the basis of following arguments.
1. A sense of Continuity: Being the part of Rajan’s core team, he was behind many vital policy decisions like inflation targeting and monetary policy committee. The disciplines that Rajan adopts need continuity and there’s a no better person who can make this happen.
2. A well versed economist: Gone are the days when Indian Government used to appoint fiscal authorities as the Governor of RBI. Patel, being a highly qualified economist and a monetary policy person with a vast experience (IMF, RBI and Ministry of finance) will definitely keep up the standard set by Rajan.
3. Successful tenure as RBI Deputy Governor: As the Deputy Governor, he was very consistent in his approach towards establishing macroeconomic stabilities over ‘only growth’ philosophy. He has shown his full potential in the various tasks assigned to him in the first term and thus he was given a second chance in January ‘16.
4. Good Equation with Government: A successful implementation of policies will happen when both fiscal and monetary authorities will look at the problem through the same lens and complement each other. Though Raghuram Rajan was a very good Governor and an Academician, sometimes he was seen as a critic of the Government, which could have created some conflict. I think Dr Patel will share a better equation with Government as he has a good record of managerial calibre.
Though there are many things to cheer about, still the road will not be perfectly smooth for the Governor. Apart from maintaining the growth and inflation equation, he has to think of the bad assets problem of PSBs and the steps to clean their balance sheet. His immediate task will be to ensure the undisruptive redemption of USD 20-25 billion of FCNR(B) deposits which are maturing next month.
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About the Author:
Pravas Kumar Sahoo
PGP 2015-17
Pravas is a 2nd year student at IIM Visakhapatnam. He has a keen interest in Finance and is passionate about Economics. His hobbies include traveling and watching movies.