Ending months of speculation, the government on Saturday announced Urjit Patel as the governor of the Reserve Bank of India.
Patel, 52, is presently one of the four deputy governors at the RBI. First appointed on 11 January 2013 as a deputy governor to replace Subir Gokarn, he was reappointed in January 2016 for another three years. He has run the central bank’s monetary policy department since 2013 and has worked closely with the Raghuram Rajan during his stint at the central bank.
According to a profile on the RBI site, prior to his appointment as the deputy governor at the RBI in January 2013, Patel was advisor (energy & infrastructure), The Boston Consulting Group. He is a PhD (economics) from Yale University (1990) and MPhil from Oxford (1986). He has been a non-resident Senior Fellow, The Brookings Institution since 2009.
Between 1990 and 1995, Patel was with the International Monetary Fund (IMF), where he worked on the US, India, Bahamas and Myanmar desks.
During 1996-97 he was on deputation from the IMF to the RBI and 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.
Patel has also served the government in various positions during the NDA-I regime. During 1998-2001, he served as a consultant to the ministry of finance, department of economic affairs, New Delhi.
Apart from these, his other assignments include, president (business development), Reliance Industries; executive director and member of the management committee, IDFC; member of the Integrated Energy Policy Committee of the Government of India; and member of the Board, Gujarat State Petroleum Corporation Ltd, the RBI site said.
Between 2000 and 2004, Patel has worked closely with several Central and state government high-level committees such as, Task Force on Direct Taxes, Union Ministry of Finance; Advisory Committee (on Research Projects and Market Studies), Competition Commission of India; secretariat for the Prime Minister’s Task Force on Infrastructure; Group of Ministers on Telecom Matters; Committee on Civil Aviation Reforms; Ministry of Power’s Expert Group on State Electricity Boards and High Level Expert Group for Reviewing the Civil & Defence Services Pension System, Government of India.
Patel has authored technical publications, papers and comments in the areas of Indian macroeconomics, public finance, infrastructure, financial intermediation, international trade and the economics of climate change.
During his tenure at the RBI Patel was seen as a close lieutenant to Rajan. He headed a committee that introduced landmark changes in the monetary policy formulation of the central bank.
The changes he helped drive are considered to be among the most significant monetary policy reforms since India opened up its economy in 1991.
The key changes recommended by the committee included:
i) Adopting consumer prices as the new benchmark instead of wholesale prices. This meant the central bank will base its interest rate policies on retail inflation or consumer price index-based (CPI) inflation. Economists have pointed out that CPI “is a better reflector of demand side pressures in the economy” as it includes the services sector price details. As the committee itself noted “The true inflation that consumers face is in the retail market”.
ii) Moving towards a flexible inflation-targeting regime with a target of 4 within a band of ±2 percent. This, according to the committee, was done in view of the vulnerability of the Indian economy to supply/external shocks and the relatively large weight of food in the CPI; and the need to avoid a deflation bias in the conduct of monetary policy”. During parliament’s just concluded monsoon session, the government notified the inflation target for the RBI at 4 percent, plus or minus 2 percent, for the next five years. Moody’s Investor Services hailed the move saying it will help moderate future price rises and support macroeconomic stability.
iii) Setting up of a Monetary Policy Committee, which will be responsible for making policy decisions, and be held accountable in case of failure to meet the nominal target. The appointment of a committee will move rate setting decision away from the individual capacity of the RBI governor to that of a committee of experts. Rajan has expressed hope that the committee will be put in place before his exit in September.
However, these path breaking recommendations apart Patel, whose remit at the RBI included managing money markets, has faced criticism from market participants, however, with some traders and bankers complaining that he kept liquidity tight at a time when the RBI was lowering rates, starving banks of cash.
With input from Reuters