India on Saturday promoted Urjit Patel, a deputy governor in charge of monetary policy at the Reserve Bank of India (RBI), to serve as its next governor for a three-year term.
He will replace Raghuram Rajan, a former IMF chief economist, who stunned financial markets in June by announcing he would step down next month and return to academia after a single three-year term at the RBI.
Mr Patel, 52, headed a panel that recommended landmark changes to monetary policy in India, including a switch to inflation-targeting and the creation of a panel to set interest rates. He will start his term on September 4.
“The appointments committee of the cabinet has approved the appointment of Urjit Patel as governor, Reserve Bank of India, for a period of three years,” the government said yesterday.
Mr Patel, who has a doctorate from Yale, was widely seen as ensuring the most continuity among the candidates believed to be in the running to be the next governor.
He was reappointed in January for another three years as deputy governor in charge of monetary policy, a department he has run since 2013.
Seen as a close lieutenant to Mr Rajan, Mr Patel will now get to implement the policies he had helped to shape.
The government is expected to announce the composition of a six-member monetary policy committee to decide on interest rates. Mr Patel and two other RBI officials, along with three members appointed by the government, will be a part of it.
Mr Rajan, who succeeded in halving the inflation rate from the double-digit levels prevailing when he took over, also persuaded the government to adopt inflation-targeting, setting a medium-term central target of 4 per cent, within a range of 2 to 6 per cent, another policy endorsed by Mr Patel.
The new governor takes over at a time when inflation has burst out of the top end of that range. Consumer inflation accelerated to 6.07 per cent last month, the fourth consecutive month it has stayed above the RBI’s near-term target of 5 per cent by March.
Aside from controlling inflation, the new governor will have to follow through on efforts to clean up banks’ bad loans so they can once again support the investments needed if India is to keep its place as one of the world’s fastest-growing economies.
Mr Patel will also have to navigate India’s tricky political scene. Members of the ruling Bharatiya Janata Party have criticised Mr Rajan for some of his speeches on economic matters and for not cutting interest rates faster.
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