Monday, August 22, 2016

The Outstanding Insider

Sudhir Raikar, IIFL | Mumbai | August 22, 2016 12:02 IST

Urjit Patel’s value prop spells a unique blend of knowledge and experience from splendid stints across spheres – academia to industry, government to corporate, IMF to RBI –that augurs well for India’s developmental agenda going forward.


The government has shown admirable restraint in keeping prudence above populism and business above politics with the appointment of Dr. Urjit Patel who brings proven credentials, dignified poise and steely resolve, all rolled into one grand stimulus package for the country. The investment community – whether at home or abroad – should cheer the appointment of a competent thought leader and practitioner who has been the cynosure of all eyes across ruling governments. His list of admirers includes names like Dr. Manmohan Sigh, PM Narendra Modi, Mukesh Ambani and Deepak Parekh – which give a fair idea of his widespread appeal. From designing IDFC blueprint to steering the Reliance energy mission, from aiding the GSPC governance to influencing the privatization of power distribution, he believes in ‘doing’ as much as in ‘knowing’, no wonder, his Yale and Oxford degrees have transcended academic boundaries, and his numerous thought papers are packed with actionable insights – incisive takes on a host of issues including Indian macroeconomics, financial intermediation, public finance, international trade and even the economics of climate change.

The harbinger of flexible inflation targeting in India, Dr. Patel has been working full steam even before assuming office as Mint Street’s top guy. That there would be no time lost in swinging into needful action is perhaps the most reassuring factor from the market perspective. In a world of perpetual uncertainty, flexible inflation targeting could well prove to be the perfect antidote for addressing the multi-hued challenges that hugely impact the larger twin cause of ensuring price stability and economic welfare. It remains to be seen how the new Governor tackles the key challenges in the path of flexible targeting including the supply-side sensitivity of CPI inflation, given the limited control of monetary policy over erratic variables like food and fuel prices. More importantly, the efficacy of his policy will hinge on credible support from the government in the form of prudent fiscal management. Patel is well known for his categorical stance, on the criticality of inflation control to steady growth and that of fiscal consolidation to achieving inflation targets.

Diffusing the NPA time bomb will be another top priority for Patel, so also steering the Monetary Policy Committee from thought towards action. That he has earlier advised the government on diverse matters including debt market management, banking & pension fund reforms, real exchange rate targeting and forex market progression gives an idea of his phenomenal range of expertise.

Patel’s appointment is beyond doubt one of Modi Government’s most momentous decisions. That media is unlikely to confer Patel with rock-star status is hardly an issue, given his proven and purposeful track record, as rock-solid as his illustrious predecessor's. Knee-jerk market response including impact on equity prices, bond yields and rupee movements notwithstanding, there’s no denying the fact that we have an outstanding insider in charge of the apex bank who has allowed us the luxury of a fresh ‘Low inflation, High Growth’ dream. We wish the new Guv every success in his monumental mission.