He had a stint in the Reserve Bank of India earlier as well, but as an adviser. This time, Urjit R Patel would be in the thick of action as its new deputy governor. He succeeds Subir Gokarn and will be responsible for the monetary policy of the central bank. His appointment could not have come at a more crucial juncture, as India Inc is looking at RBI with optimism for possible rate cuts.
Patel, recently, did offer a glimpse into the ideas he might bring to the bank. He said the central bank’s policy efforts were striking, though their impact on inflation was gradual and weaker than imagined. He also said inflation was still high as many external factors had more than offset the effect of monetary tightening of the central bank.
What do these views really mean? Will he support growth through monetary tools or will he be more concerned with reining in inflation? RBI’s monetary review on January 29 will partially reveal where his stand lies.
By the time RBI comes out with the review, it would have more data to assess India’s macroeconomic situation. Recent numbers are confusing since core sector growth points towards deceleration in industrial growth, but HSBC purchasing managers’ index (PMI) for manufacturing indicates revival.
RBI is widely expected to cut the repo rate in the January review. If that happens, it will be the first since April 2011. In that sense, the first monetary action may not reflect Patel’s thinking.
For Patel, this is a re-entry into RBI. Between 1995 and 1997, he had worked as an adviser with the bank on banking sector reforms, debt market, pension fund reforms, real exchange rate targeting and the development of the foreign exchange market.
He had also worked as an adviser in the finance ministry during 1998-2001. In his new job, Patel’s experiences with RBI and the finance ministry are likely to be an asset.
His appointment comes at a time when RBI and the finance ministry are having deep disagreements on rate cuts. Though the government has been urging RBI to cut the interest rates, RBI has steadfastly refused to do so. It has kept the repo rate at 8 per cent since April 2011. RBI’s doggedness comes despite Finance Minister P Chidambaram announcing a revised fiscal consolidation road map to show the government’s committment to prune the gap between the Centre’s expenditure and receipts.
In this respect, the finance minister had prescribed bitter medicines for the economy as both fuel and power prices were raised. The finance ministry’s actions seem to be in line with Patel’s thinking. In one of his articles, Patel argues the petroleum sector has become a fiscal morass for the central government, and that the electricity sector in many states is just as problematic.
Patel has closely worked with many high-level central and state government committees. While at RBI, he served on the expert committee on integrated energy policy. He was also a part of the task force on direct taxes.
Patel’s specialisation at the Boston Consulting Group was on energy and infrastructure and he has nearly a decade of experience in the Indian financial sector, with a specialisation in infrastructure financing.
Currently, he is a consultant with Boston Consulting Group and a non-resident senior fellow at the Brookings Institution.
Patel has a PhD in Economics from Yale University and an MPhil in Economics from the University of Oxford. He has been a contributor to many international journals including the International Economic Review and the Journal of International Economics.
Between 2007 and 2011, he was president (business development) at Reliance Industries Ltd, where he worked on strategising commercial approaches for energy companies.
He also worked with the International Monetary Fund and was an independent member on the board of one of India’s major integrated energy companies, Gujarat State Petroleum Corporation.