Urjit as RBI Governor: Step in Right Direction
VINOD C DIXIT, AHMEDABAD
This has reference to the thought-provoking article ‘Challenges before new RBI Governor’ (NT, August 23). The choice of Dr Urjit Patel, an eminent economist, consultant and banker, as the 24th Governor of the Reserve Bank of India reflects the government’s preference for continuity to the Dr Raghuram Rajan tradition and is a step in the right direction. Dr Patel, working closely with Dr Rajan, is piloting India’s transition into a new monetary policy regime. Dr Patel, the senior-most Deputy Governor at the RBI, is the architect of the new monetary policy framework and is working closely with the cabinet secretariat and the Finance Ministry to ensure a smooth transition. No doubt, Dr Patel will have to face number of challenges ranging from reining in inflation to managing currency volatility but looking at his profound vision about global economy and extraordinary intellectual power about understanding the financial problems in India, he will continue the good job done by his predecessor Dr Rajan in containing inflation and reducing the interest rates. In other words, Dr Rajan’s replacement will be pressurised to cut the rates even more. His appointment as Governor will also come as a relief to international investors. Being the man who has seen RBI’s policies and framework, it is expected that his decisions regarding interest rates, monetary policy, cleaning the NPAs of banks etc will be balanced keeping in mind the circumstances prevailing from time to time. During his tenure at the RBI, Dr Patel was seen as a close standby to Dr Rajan. Even as the Deputy Governor of RBI, Patel, an abrasive personality, has played a vital role in developing the new monetary policy framework. The changes he helped impel are considered to be among the most momentous monetary policy reforms. The challenge he will have to face is the mountain of bad debt at the country’s government-owned banks. It is said that Patel is a strict fiscal disciplinarian, known as “inflation warrior” of Dr Rajan and the “right man” to succeed him. He will certainly bring down inflation within the accepted limit so that the growth can be on the basis of solid economic foundation in the long run. What people expect is that besides controlling inflation, Dr Patel will have to follow through on the efforts to clean up banks’ bad loans to support the investments needed and to keep our country as one of the world’s fastest growing economies.