The penny has finally dropped with the Indian government announcing the appointment of Urjit Patel to lead the country’s central bank, taking over from incumbent and former chief economist at the International Monetary Fund, Raghuram Rajan.
Rajan’s public differences with various policy approaches of Indian Prime Minister Narendra Modi’s government, his candid comments on issues ranging from religious tolerance to economic achievements, and the relentless personal insults hurled on him by a section of the ruling Bharatiya Janata Party (BJP) members, seemingly prompted his decision to leave the Reserve Bank of India (RBI) at the end of his first term to resume his academic duties at the University of Chicago.
But the irony of Dr Patel succeeding Dr Rajan is not lost on anyone. Patel, a Yale economist currently serving as Deputy Governor of the RBI, is known to be a reticent speaker and reluctant to speak his mind in public forums. However, as one of the most trusted lieutenants of Rajan, he helped spearhead the biggest reforms to India’s central bank in its decades-old history, including implementing tough and often politically unpalatable inflation targets, and holding debt-ridden state banks accountable for dubious corporate sweetheart deals. Therefore, in terms of policy outlook, Patel, also known as the ‘Inflation Warrior’, might prove to be a bigger hawk than Rajan. Patel’s promotion is also one of the clearest signs that the Modi government is wary of any further negative publicity or any adverse impact on markets due to the departure of Rajan in an already volatile economic climate. In many ways, Patel is a worthy successor to Rajan — but it would have been a far happier outcome for everyone concerned had the question of succession itself not risen due to the untimely and politically manoeuvred exit of a world-renowned economist such as Rajan.
