Government hopes Urjit Patel will ‘rise to occasion’, curb inflation

A deputy governor at the Reserve Bank of India (RBI) since 2013, Patel is due to replace outgoing RBI governor Raghuram Rajan on September 4.

Dr Patel is presently the Deputy Governor of RBI and is holding this assignment since 2013.

“His (Patel) appointment is the right decision and is in the interest of the country”.

Bond prices fell on Monday as investors paused their recent liquidity-fuelled purchases of government debt to take stock of the appointment of Reserve Bank of India (RBI) Deputy Governor Urjit Patel as its next head.

A panel under his chairmanship had proposed inflation-targeting and the setting up of a monetary policy committee. Economic Affairs Secretary Shaktikanta Das, who himself was said to be in fray for the top post at the apex bank, welcomed the appointment of Patel as the 24th RBI Governor. With Patel at the helm, it is unlikely that the central bank will cut interest rates in the immediate term since he would most probably want to wait for inflation to come down to a more comfortable level, market participants said.

“Choosing Patel suggests that the government supports or at least is content to continue with Rajan’s policies at the RBI, some of which Patel helped to develop and implement”, Mihir Sharma, a Bloomberg view columnist, wrote. The government has set a consumer inflation target of 4 per cent, plus or minus 2 per cent.

“In that role he has to ensure smooth functioning of financial sector and he also has to look into flow of credit to various sectors in particular the requirement of agriculture and MSME sectors”, he said. However, in 2004, Patel along with others in the top management resigned protesting against then finance minister Jaswant Singh’s proposal to handover the institution to State Bank of India. “Even though he is less experienced, I think he will do the job well”. Mr Patel himself is known as an “inflation warrior”, and brings with him valuable experience that includes stints with the corporate sector besides his work at the International Monetary Fund like his predecessor.

Indian media had speculated that Prime Minister Narendra Modi would name a monetary dove to replace Rajan.

Nomura Securities over the weekend cut its forecast of a rate cut in the fourth quarter from 65% to 55%, because “two of the six MPC members (Urjit Patel, Michael Patra) are on the hawkish side and given the governor has the deciding vote in the case of a tie”.