urijit patel

We had a very difficult time judging the latest edition of Pen Is Mightier Than The Sword presented by Meghnad Desai Academy. However, after a lot of scrutiny, we managed to pick two winners from a huge pool of entries. The first prize goes to Kimberly Rowe and Suvir Chandna emerges as the runner-up. For all those asking, here are the criteria we used to judge:

  1. Structure: language, Organisation of ideas and simple relay of protectionist policies
  2. Develop an idea/argument/point of view, that captures the response to the question. …opinion expressed briefly)
  3. Engagement: Is the piece Persuasive/Interesting? 

Here are the winning entries. Read them at leisure.

  1. Suvir Chandna

Time is the most accurate story-teller, and as in every case, here too only time will tell whether Urijit Patel turns out to be a better RBI Governor than his predecessor, Dr. Raghuram Rajan.

However, it is human nature to speculate and I strive to shed light on some of the areas we should consider if we attempt to answer the question posed above. In the broadest sense, for a comparative analysis, we must understand the similarities and the differences between the two monetarists.

Unlike Dr. Rajan, Urjit Patel has also, served as the Deputy Governor of the Reserve Bank of India (RBI) before taking on his current role. In what appears to be an effort in the direction of “policy continuity” by the government, Urijit Patel can be expected to follow the same inflation targeting policy by using interest rates as the intermediate target. Furthermore, it is expected that Mr. Patel will carry forth the crusade started by Raghuram Rajan to sanitize the balance sheets of the banks and ensure the control of Non Performing Assets(NPAs), at manageable levels; this seems to be part of a larger agenda of implementing the Basel norms in 2019. Another issue, perhaps more sensationalized, is the impact of GST on inflation. Again, given the textbook economics that worked wonders for Dr.Rajan, we can expect the current Governor to be able to manage inflation within the newly stipulated guidelines and perhaps comfortably accommodate rate cuts.

In contrast to the “inflation hawk” that Raghuram Rajan was popularly known as, Mr. Patel has been deemed by some, to be more of a “dove”. However, one must tread carefully while calling him one because the RBI had already set its inflation (CPI) target to 4%(+/- 2%) before his tenure as governor and he is likely to reduce interest rates so long as inflation is in check.

Furthermore, a cursory look at Urjit Patel’s previous experience seems to be spread out across various industrial sectors as well as the financial sector in contrast to his predecessor who had established somewhat of a niche in academia. This experience most certainly gives Urjit Patel some advantage to tackle the current issues in the country in the best manner.

In conclusion, it is safe to say that Urjit Patel will be at least as good as his predecessor who brought structural stability into a dwindling economy. The onus of maintaining this stability and insulating the economy from shocks is what lies on the newly appointed governor. We must look out for adaptive policies of the RBI to structural changes like the GST and the Basel norms among several others in the pipeline. With synergetic policies of the government to reduce unemployment thereby overcoming the unemployment-inflation trade off, India will speed up its development journey exponentially.

2. Kimberly Rowe

In a progressive and transformational world, change should invariably be for the better, but while that may well be the ideal, there cannot be any certitude of such evolutionary positives especially when the human quotient is an integral element in the equation.

Urijit Patel is, needless to say, an eminent economist, and the question: Will Urijit Patel prove to be a better RBI Governor than Mr. Raghuram Rajan? is more an acceptance of the colossus that Raghuram Rajan is, than any affront to the ability of Urijit Patel.

Having been the architect of the Monetary Policy Committee structure that abridged the interest rate setting power of the RBI, Urijit Patel will, doubtless be confronted with pressure to abandon the inflation-centric stance of his predecessor and support the agenda to ease interest rates in the effort to accelerate growth especially with elections in critical states and Municipal Corporations just around the corner. The first signs of capitulation to the political agenda are visible in the announcement of a 25 basis points reduction in the repo and reverse repo rate in the October 2016 Credit Policy Review. With the impact of the 7th Pay Commission and the increase in minimum wages still obscure and potentially humungous, the present headline inflation rate provides cold comfort. The structured approach to controlling inflation has been sacrificed at the altar of political expediency.

Urijit Patel’s other major challenge will be continuing the cleaning of the Augean stables, the bad debts splashed across, but more often, covertly concealed by the banking sector. The surgery initiated by Raghuram Rajan is a work in progress; one that has raised the hackles of not only banks and borrowers but also of the mandarins of the Ministry of Finance. A continued surgery, with its inevitable impact on capital adequacy, will obviously jeopardise the prospects of transference of reduced interest rates, and off-take of credit, and therefore, Urijit Patel will beyond a shadow of a doubt have to contend with demands for a volte-face or at the very least softening of the exercise of bad debt identification and sanitisation of bank books.

The handwriting was on the wall, the day that Urijit Patel was anointed as heir to the throne of RBI Governor. Surprisingly, though the media, the banking sector and industry bigwigs were quick to christen him as Raghuram Rajan Version 1.1, the question of the need for change if consistency of approach was at all a prerogative, travelled under their radar. The undercurrent in the changing of the guard is clear: this government is not one to tolerate dissent and surely Urijit Patel is perceptive enough to have read the tea-leaves.

The simple conclusion is that Urijit Patel has the expertise to be as good as, if not a better RBI Governor than Mr. Raghuram Rajan. But, the answer to the question: Will Urijit Patel be a better RBI Governor than Mr. Raghuram Rajan must be a resounding – No. And for reasons other than competence!