By Ruma Dubey

So the market and all of us thought that the Modi Govt, after the non-extension of Raghuram Rajan’s RBI Governor tenure would get in a “Yes” man, who will just be a figurehead, a rubber stamp, or should we say, a signatory on the Indian rupee notes.

What we have instead is a very independently thinking man, a person who closely worked with Rajan and is well respected and recognized in the financial world. Urjit Patel is the new RBI Governor and needless to say, it’s a very good choice. This puts to rest one more niggling doubt – no “yes” man for sure!

Needless to say, the market wanted someone else, someone from the ‘inside’. And that explains why the market and the rupee has fallen today. The market had a very silly notion – the new RBI Governor who will come in will be quick to bring down rates and would be less hawkish. But Urjit Patel is now the one to bring down rates in a hurry, with him likely to continue with Rajan’s hawkish eye on inflation.

Currently the deputy Governor, he has been instrumental is putting some path breaking policy measures – most important amongst them being using CPI and WPI for inflation measure, which Rajan changed over to. Patel has also recommended a committee, like the one which is expected to take charge soon for policy decisions’ Patel has put forth the idea of a similar committee for targeting inflation too.

Patel is the apt choice from all aspects as it has also sent the right message across to the FIIs – the new Governor will continue with Rajan’s work thus ensuring policy continuity.

Rajan’s appointment and his first day of office, the market greeted him with a surge into the green but with Patel, the market is a bit subdued. Yet, one has to know that our macro concerns remain. It feels good to know, in a contrived kind of way, to know that the Parliament and the politicians are finally working, getting Bills passed.

Patel has his task cut out for him. Apart from facing massive pressure to bring down rates from the cronies of the Govt to bring to halt the cleaning process of the banks, washing out the NPAs in the open, Patel could have a confrontation with the Govt when it comes to using RBI funds to recapitalize public sector banks. Rajan has been against this idea; rightly so because funds with RBI should be the kitty which India can fall back upon in times of contingencies. Moreover, diverting RBI funds to PSU banks means putting more money into the hands of the cronies to loot further.

It is too early for one to know what stand Patel could take when the times comes but going by his work till now and quiet reputation, he could have a face-off. For that matter, all RBI Governors, begin by being on the same side of the Govt but over a period of time, as matters get more ‘macro’, the Governor is almost always on the opposite side.

Let us see which side Patel will stand but for now, kudos to this choice!