Urjit Patel’s resigns, Shaktikanta Das appointed new RBI governor
On a day results of elections to five state assemblies exposed the vulnerability of the Narendra Modi government less than half a year before the next general elections, it named Shaktikanta Das, a tested bureaucrat perceived to be close to it, as the new governor of the Reserve Bank of India (RBI). Das’s appointment for three years, which came within 24 hours of Urjit Patel’s resignation amid a rift between the Centre and the RBI on a host of issues including how the central bank is governed, gave credence to the notion that the government had anticipated Patel’s exit and thought of alternative arrangements. The Appointments Committee of the Cabinet’s quick decision, without the customary rigmarole of inviting applications and interviews, demonstrated the government’s keenness to keep the pace of current deliberations over RBI’s reserves transfer policy and empowering its board. “The premature exit of the Governor of the RBI needs to be introspected from a longevity and continuity perspective. However, given the recent active involvement of the board as well as the delegation of policy decisions to the committee format I do not believe there will be a huge impact. Infact, given the low inflation levels, we hope to see increase in liquidity and a reduction in interest rates to spur the real estate sector which is facing headwinds on account of various factors.” States Rohit Gera, Managing Director of Gera Developments Pvt. Ltd. While the last two RBI governors — Patel and his predecessor Raghuram Rajan — were renowned economists, the galaxy of India’s central government governors include several bureaucrats. In recent decades, Yaga Venugopal Reddy and Duvvuri Subbarao, who respectively were the 21st and 22nd governors of the central bank, were roped in from the IAS fraternity, although both were also trained economists. Das is perceived among his peers as an ‘upright’ bureaucrat with a style of functioning which is highly organised. Das as RBI governor could minimise the chances of any potential conflict between the government and RBI. Experts note since the inflation-targeting framework has been adopted by the RBI and a structured Monetary Policy Committee (MPC) is in place for regular review of the monetary policy, the governor or for that matter the RBI’s executive management have to pay heed to the three non-RBI members of the six-member MPC on interest rates and policy stance.
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