Transition sans disruption

After Raghuram Rajan was denied an extension as RBI Governor, there was a widespread apprehension that the government would bring in as replacement someone pliable, less harsh on bad loans and corporate defaulters, and dovish on inflation. That has not happened, fortunately. Perhaps, faced with criticism over losing a competent central banker and fearing an adverse response from foreign investors over a less worthy choice, the government has played safe by naming Urjit Patel as the successor. The final list had formidable contenders — Chief Economic Adviser Arvind Subramanian, Economic Affairs Secretary Shaktikanta Das, the RBI’s former Deputy Governor, Subir Gokarn, and noted economist Kaushik Basu. It was doubtless a difficult exercise but few would disagree with the final selection. It seems Urjit Patel’s role in managing the Brexit fallout while Rajan was abroad tipped the scales in his favour.

Having been a Deputy Governor for three years, Urjit knows the job he has been given. He belongs to the Raghuram Rajan league, having honed his talent at Oxford, the University of London and Yale, except that he lacks Rajan-like rock-star status. Urjit is known to work quietly, away from the media glare. Rajan lost his job partly because being young, forthright and bubbling with ideas, he could hold forth on any issue, sometimes treading on the toes of those running a less-than-tolerant government. 

Like Rajan, Urjit Patel is in his early fifties, a believer in free markets and opening up of the banking system with first-hand experience in infrastructure financing. A non-confrontationist temperamentally, he knows how to hold his horses. Besides, he uses the language of bankers/economists, which means he would invite little trouble unless the new office transforms the man. Finance ministers are known to pressure RBI Governors into lowering interest rates to boost growth. However, Urjit is considered as a hawk on inflation and is expected to toe the Rajan line. Subramaniam Swamy may be hard put to explain why he likes the one and not the other. Carrying on the bank NPA clean-up job, continuing the heat on wilful corporate defaulters and, above all, keeping intact the RBI's autonomy will be his key challenges.