Appointment of Dr Urjit Patel as the new RBI Governor
The government announced on 20th August that Dr Urjit Patel will be taking over on 4th September as the new RBI Governor from Dr Raghuram Rajan who completes his 3 year term in September. The selection of Dr Patel is a positive for 2 key reasons. Firstly as a core member of Dr Rajan's team since 2013, he represents continuity in terms of policy direction. Further, as a respected economist with long standing policy and consultation experience, he brings strong intellectual capability to the role.
Both the above aspects will be crucial in continuing the multi-pronged structural reforms initiated by Dr Rajan over the last 3 years. Indeed, Dr Patel was the author of the report on reforming monetary policy that led to the 2 signature changes of the Rajan era - adoption of a formal inflation target, and setting up of a monetary policy committee.
We perceive Dr Urjit Patel as a firm believer in the role of stable inflation in achieving medium term economic growth and development. He has on many occasions communicated his view that sustained high food inflation does percolate into increased rural wage growth which has secondary and tertiary effects on overall inflation and hence it is important to control food inflation for sustainable growth
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He considers RBI governor's role as an "owl", who does not have a pre-defined "Dovish" or "Hawkish" stance and hence we feel that future monetary policy actions will be more data dependent after assessment of Marco economic data. His other contributions include the targeting of a positive real rate.