By Mohd Umair Khan
‘Sometime you never know the true value of moment until it becomes a memory’. The Rajan’s leadership is developing to become a memory as the new name is going to list among the elite Economists and Bureaucrats, served as the Central Banker of India, the fastest growing major economy of the world (these days). The former president of Business Development at Reliance Industries Limited and the current RBI Deputy Governor Dr Urjit Patel will take over as the new Governor of the RBI.
Dr.Patel tweeted the very first time after the official announcement.
The similarity between Dr Rajan (53yrs) and Dr Patel (53yrs) as the Governors is that both have acquired the prestige post at the age which is considered as young (for RBI Governors).
‘The Wire’ applaudedfor RaghuramRajanas the RBI Governor whose reappointment controversy was addressed as an Amul cartoon, and whose public image may have even veered towards becoming that of a ‘people’s’ governor[i]. That was all because of the courage and openness that Rajan shown speaking on non-financial issues in particular. But the question is that will Urjit Patel be fortunate or stubborn enough to get or extract that freedom thatRajan enjoyed or maintained.
Talking about the official task, Urjit Patel (being the Deputy to Rajan) is familiar enough with the institution and its functioning. But some chairs differ in comfort.
Inflation (Consumer Price Index) came down in Rajan’s tenure from 10.62% in August 2013 to 5.77% in June 2016, whereas the inflation target of the RBI (the mechanism started last year) is at 4%, with a band of plus/minus 2%.
Figure 1 Variation in CPI based Inflation from the year 2013 to 2016.[ii]
Rajan’s legacy dosn’t end here- India’s current account deficit in the three months to June 30, 2013 was approximately $21.77 billion, compared to $320million in the three months that ended March 31, 2016.
Figure 2 India’s Current Account Deficit from March 2013 to March 2016.[iii]
The revival of rupee is also credited to Rajan. When he took over as the apex bank’s chief, India was struggling with the Currency Crisis. His policies aided the rupee to stabilize against the dollar. He introduced a program where banks were incentivised to offer Dollar deposits to Indian citizens abroad and used that money (the Dollars) to exchange for rupees at lucrative rates for bankers.The rupee rose to as high as 58.36 against the dollar in 2014 before hitting levels near 69 against the greenback (i.e Dollar) in February.
Figure 3 Value of Indian Rupee against 1 Dollar.
These things got plaudits to the going Governor and signalling ample amount of expectation for his successor. However Urjit Patel saw all this very Closely, sincesome of the such committees he headed (such as committee on RBI’s first Inflation target) and has the executive calibre.
But there are challenges that the new Governor has to face despite all the advantages he has. The Challenge posed by bad loans. Rajan in his farewell letter[iv] (Jun 18, 2016) said that two things are still to be completed, one of which was the bank clean up (still ongoing), initiated under the Asset Quality Review, which has brought more credibility to bank balance sheets. International developments also pose some risks in the short term.Urjit Patel’s plans (upcoming) – to deal with the burden of NPAs (Non-Performing Assets), depreciation of Rupee and maintaining the inflation within the planned gamut, will zoom out by the critics.It’s the time that’ll tell whether Dr. Patel is a good choice or not a good one,but speculations are inevitable in this development. For now – welcome to Dr.Urjit Patel our new Governor (RBI).
By Mohd Umair Khan
Mohd Umair Khan is an Undergraduate Student at Deptt. of Economics, Aligarh Muslim University. And can be reached at email@example.com
[ii] From CNBC
[iii] From CNBC