Same Textbook, but Different Lessons

Closing off months of speculation, the government on Saturday, 20th August 2016 finally announced Dr Urjit R Patel as the 24th governor of the Reserved Bank of India.

Dr. Patel was not a unanimous choice however. He was one of the four names on the table during a meeting between the PM Narendra Modi and the Finance Minister Arun Jaitley. The other four prospects for the highest post at RBI were Chief Economic Adviser Arvind Subramanian, former CEA and currently World Bank's Chief Economist Kaushik Basu, and former RBI deputy governor and now India's representative at the IMF, Subir Gokarn..

A senior government official privy to the deliberations of the committee said the choice had come down to a contest between Patel and Subramanian but it was Patel who finally got the nod because he was always the PM’s first choice. "Patel’s appointment signifies continuity... He has worked in the government as opposed to Subramanian who is too new to the system", said an official who was involved in the rigorous selection process.

Patel, 52, took charge of the office of the governor on 6th of September after his predecessor’s term expired on the fourth, under whom, he was a deputy governor.

"Appointment of Urjit Patel comes as a welcome move,'' said Arundhati Bhattacharya, chairman of State Bank of India. He has worked closely with Rajan and is often seen as his close lieutenant. This adds to the conviction that Patel, as RBI governor, will ensure continuity of Rajan’s policies.

As it is, Rajan and Patel have multitudinous similarities, both in their ideologies as well as their economic and financial policies. Inflation and fiscal hawk - check, global academic credentials - check, worked with the government - check, has been an IMF economist - check. Patel is known to be someone, who like Rajan is committed to RBI’s biggest goal of keeping prices in check. Since the last three and a half years, he has been running the central bank’s monetary policy department and has been working closely with Rajan during this stint. Incidentally, it is also Patel who is the man behind RBI’s new Monetary Policy Committee (MPC) framework and inflation targeting approach. Unbeknown to many, a paper coauthored by Patel is behind the 3% fiscal deficit target that the government established a few years ago and is now under revision. Additionally, it appears that both Patel and Rajan are knuckled down on setting up an effective monetary transmission policy. This is something that Rajan has been stressing on time and again, especially with respect to rate cut transmission by banks.

While Rajan and Patel share a similar economic ideology, there are matters where they are as different as chalk and cheese. The difference begins with their personalities and their style of communication and functioning. Communication has been honed to a fine art by today’s economists, and Rajan is a master at it. Rajan’s speeches are conversational and mostly bereft of jargon as they’re targeted at the layperson. Contrary to this, Patel speaks the expert’s lingo. In his three years tenure as a RBI Deputy Governor, Patel has given only two speeches as opposed to Rajan who lets loose a torrent of words and views at us. Some believe that as a RBI governor, Patel would need to communicate more while many others mull over the notion that Patel’s low-key style will be useful in rebuilding ties with the government.

Patel has the potential to create a difference, a potential recognized by many. Infosys founder and IT doyen N R Narayana Murthy, who had earlier pitched for a second term for Rajan, said, “Patel is the right man to succeed Raghuram Rajan. Who better than him to see what needs to be done to stimulate growth and contain inflation?" Regardless of all this, one thing is certain, Patel’s job would by no means be easy, especially given the star status and the global credibility that his predecessor Rajan attained. We can only hope that Patel steers the economy in the right direction, taking it to still newer highs.

–Shreeya Jain