Challenges of Urjit Patel as RBI Governor
After a good time of speculations and discussions, finally government announced Urjit Patel as the next Governor of 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.
With soaring inflation and the rupee hitting its all-time low, Raghuram Rajan had taken over as the Governor of the Reserve Bank of India at a difficult time for the Indian economy. Urjit Patel, too, will have to face his own set of challenges as he begins his journey at the helm of the central bank on September 4.
Greater stability on the currency front and relatively lower inflation levels notwithstanding, economists feel that a sudden spurt in inflation, which hit a 23-month high of 6.07 per cent in July led by a jump in food inflation, is something that may keep the new Governor busy for some time.
While Rajan pushed banks to recognise bad loans and thereby clean up the system, experts feel that as the banking sector faces risk of a further rise in the non-performing loans, particularly of the public sector banks, Patel will now have to negotiate with the same.
The markets were expecting a rate cut in the next monetary policy review meeting in October. However, jump in inflation levels and Patel’s appointment is forcing people to temper their expectations.
It is important to note that Urjit Patel had in his report in January 2014 proposed to adopt the retail inflation as the anchor for monetary policy as RBI redefined itself as an inflation-targeting central bank.
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