As a student in OxfordBSE -4.88 % in the mid 8Os, Urjit Patel’s often amused himself by going through Private Eye, the British satirical magazine which thrived in reporting the misdeeds of the rich and famous. His other favourite was the hilariously fictional world of Mr Bean — his wacky antics and the sticky situations that the lovable character found himself in.
Patel seems to have picked his lessons from such civilized entertainments: as a deputy governor of the Reserve Bank of India, he constantly endeavoured to stay under the radar; those unfamiliar with esoteric debates in economic journals would be clueless about his views; unlike his boss, the charming Raghuram Rajan who tossed weekly soundbytes, Patel rarely spoke. Even when his friends – and he doesn’t have too many – enquired about his chances of succeeding Rajan, Patel scotched it as media humbug.
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But as the 24th RBI governor Patel will now remain under the media glare for the next few years. When a deputy governor steps into the shoes of a governor – as Y.V.Reddy took over after Bimal Jalan stepped down – the world perceives it as continuity amid change. With Patel, it could be less seamless. The new governor is best known for the eponymous report that changed the nature of monetary policy in India and made “inflation targeting” by central bank a law. This can’t be altered, even if the new Governor was not as much a fiscal hawk as Patel is. The anxiety and expectations around Patel are strangely different: financial markets, banks and Corporate India are anxious to know what he stands for; they know very little about him; Patel’s colleagues find him somewhat cold and distant; and he has rarely met bankers to either share his views or receive their feedback. Several economists are going through the Patel committee report with a fine toothcomb to guess what could be the new Guv’s next move.
Few expect him to make surprise announcements soon after taking charge. While perhaps that’s not his style, the best that Patel can do is to speak out, share his thoughts, and establish himself for what he believes in. Even if the role of the new Governor diminishes a little with the formation of the new monetary policy committee, markets are desperate to figure out his stance on two diverse yet key matters – liquidity and defaulters; whether he changes his earlier stand to admit the need for sustained liquidity in the money markets; and, whether he would go after defaulters or throw a few concessions at them. Whatever his views are, Patel has to tell the world about it. His communication policy is unlikely to be as dramatic as his rockstar boss, but, as RBI Governor it should change significantly.
In some of his academic papers, Patel — who received his doctorate degree from Yale after graduating from LSE and completing his MPhil from Oxford – comes across as a fiscal conservative. One his early papers with Willem Buiter (the current Citigroup chief economist) talks about the pitfalls of fiscal expansion while a recent paper, he co-authored with a fellow economist, hints at the limited role that monetary policy can play in changing the economic fortunes of emerging markets.
But Patel probably believes that measures less glamourous than monetary policy could bring about a deeper change. He may have experienced some of it while working at the financial institution IDFC when he shared his insights on reforms on electrification and infrastructure that an energetic chief minister called Narendra Modi was pushing through to keep Gujarat ahead of others. It also drew him closer to bureaucrats (such as Hasmukh Adhia) in the western state, with some of these bonds strengthening over the years.
As governor, Patel may have a little time and luxury to change his tack and pick his priorities. With no visible crises on growth, currency, and fiscal deficit, he may even let the RBI be on auto-pilot for a while. The new governor, however, would be tested on two fronts: first, any exogenous shock such as a fiasco in China or Trump’s triumph; second, changing the state of Indian banks and Indian banking.
Despite his apparently reclusive nature – having changed over the years with former old colleagues remembering him as a chatty, humourous person – Patel’s choices have always been right. Long before he advised Gujarat on infrastructure, Patel, working at the IMF India desk in the early ’90s, is said to have backed India in the crises years when the multilateral agency was breathing down the neck. It was appreciated by men and women who mattered then.
Patel had once said the central bank is neither a hawk nor a dove but an owl that observes wisely. He may keep (and rightly so) his next move a secret. But one hopes he will be wise enough to make the right choices, win the trust of his colleagues in RBI, and preserve that humble yet majestic detachment that some of his predecessors had kept with New Delhi.