Urjit R Patel will be stepping into Raghuram Rajan’s big-sized shoes from September 4. But he has been walking through the minefield of Indian economy long enough behind Rajan and won’t need a map.
Patel’s promotion creates an historic milestone, his grandfather’s extended family hails from Palana village in Kheda district of Gujarat, 45 km from state capital Gandhinagar. Palana was also home to another RBI governor — IG Patel.
Patel, who has been associated with major economic initiatives taken by the government, had also worked as an expert commentator on a TV show. In fact, that’s how people took note of him for the first time.
In 2009, the UPA had just come back to power with the voters backing original Reforms — Dr Manmohan Singh — for a second term. During those heady days, the UPA announced a ‘100 day action plan”, which later became the subject of intense criticism in the media and ridicule in political circles. Patel was seen on a Hindi news channel as an expert in a series tracking the first 100 days. The man with a Yale degree came across as simple, effective in all the six episodes, making meaningful statements on economic issues. The channel producers were very happy with the viewers’ response. In January 2013, he was sitting in RBI deputy governor’s office.
In January this year, when he was re-appointed the RBI deputy governor there were no raised eyebrows. India’s monetary policy framework was being radically altered and he was one of the key architects of the restructuring.
After Raghuram Rajan announced in June that he won’t be available for a second term and would return to academics, Urjit Patel’s name was never “not-in-contention”. But the talk about “other names” was always shade louder.
Top government functionaries have been candid in admitting that the list of options available to replace Rajan was not long. The five shortlisted names were Arvind Subramanium, the current chief economic adviser, Shaktikanta Das, the secretary economic affairs, Kaushik Basu, senior vice-president and chief economist of the World Bank and Subir Gokarna, who as outgoing deputy governor of RBI in 2013 had made way for Urjit Patel. The fourth and unstated criteria was low profile — as outspoken Rajan had made the government squirm many times during his two-year relationship.
Since June, when Rajan announced his NO, speculations on his successor have been intense. The buzz was the government will go for some “big name” to silence those who have been questioning why someone of Rajan’s eminence and proven track record was not being given a second term. The current boss of Niti Ayog, Arvind Panagariya, was one of them. The spin was that Panagariya in world economics is the “big daddy”. As head of Niti Ayog he knew Indian economy, had global experience and reputation. But there was a hitch. As Niti Ayog boss, his rank was equivalent to a cabinet minister while the RBI Governor gets a junior minister protocol. The government was averse to upgrading the RBI Governor’s status.
Last year, on February 20, despite claims that inflation targeting is neither feasible nor advisable in India, the government and the RBI had inked a deal for a Joint Monetary Policy Panel consisting of government and RBI representatives, which will set inflation target and RBI would tweak policy rates to adhere to those.
Over the last few months, Rajan had to keep looking over his shoulder. He had strayed beyond the conventional lakshmanrekha earlier RBI chiefs had drawn and he and his policies were facing hostile political fire even from ruling BJP.
Patel can provide the calming touch to the ruffled government-RBI relationship during the last two years.
As part of the RBI’s efforts to clean up of the banking system, with focus on state-owned banks, Patel needs to tackle the Gross Non Performing Assets (GNPAs) of Indian banks that rose to the 6 lakh crore mark (Rs. 5,94,929 crores) at end of March 2016. He has to lubricate credit flow for improved economic activity. In 2005, Patel was appointed a non-executive director on the board of Gujarat State Petroleum Corporation. Guess who wooed him to Gujarat – then chief minister Narendra Modi. In 2013, before he was appointed deputy governor, Kenya-born Patel didn’t have an Indian passport. The Home ministry received a recommendation letter from then PM Dr Singh, stating “Patel was very important for the country”. Some people are highlighting his association with the Reliance Industries. Asked about this, a senior finance ministry official quipped, “he has also worked with news channels”.
(Rahul Shrivastava is Senior Editor, Political Affairs NDTV 24×7)