NEW DELHI: Ministers and top bureaucrats expect Reserve Bank of India governor-designate Urjit Patel to "rise to the occasion" and use his experience of handling monetary policy at the central bank to maintain a balance between inflation and growth. Patel, who is currently deputy governor at the RBI, will take over the top job when incumbent Raghuram Rajan demits office on September 4 after completing his three-year term.
"He (Patel) will hopefully control inflation rate since he has experience of monetary policy," minister of state for finance Arjun Ram Meghwal told reporters on Monday. He termed Patel's appointment as a "right decision and in the interest of the country". Economic affairs secretary Shaktikanta Das, who himself was said to be in the fray for the top job at the central bank, welcomed the appointment of Patel as the 24th RBI governor.
"With his background in monetary economics, monetary policy and other fields, I am sure he will rise to the occasion and keep in mind the requirements of monetary policy and the inflation target that has now been laid out in the RBI Act," he said. The government has set a consumer inflation target of 4 per cent, plus or minus 2 per cent.
The RBI's next monetary policy review is due on October 4. Das said Patel "will also balance the requirement of growth which is in fact the mandate as per the amended RBI Act".
Pointing that the central bank head is also the regulator of banks and non-banking financial companies (NBFCs), Das said, "In that role he has to ensure smooth functioning of financial sector and he also has to look into flow of credit to various sectors in particular the requirement of agriculture and MSME (micro, small and medium enterprises) sectors."
Minister of state for finance Santosh Kumar Gangwar said, "I believe Patel will take the economy in the right direction. Even though he is less experienced, I think he will do the job well."
Monetary Policy Committee
The government will constitute the monetary policy committee (MPC) in line with the new framework.
Once formed, the six-member MPC will decide on interest rates based on the inflation target under the monetary policy framework agreement.
The three government nominees will be short-listed by the search-cum-selection committee headed by the cabinet secretary. The panel held its first meeting recently to consider the candidates.
The other three members are RBI governor, deputy governor in-charge of monetary policy and an RBI executive director. Outgoing governor Rajan has already said Michael Patra, who is being tipped to take over as deputy governor, would be one of the nominees from the central bank.
The governor will have a casting vote once the country shifts to the panel system for setting rates.