As Urjit Patel, governor of Reserve Bank of India (RBI) completes two years in office today, comparison with previous governor Raghuram Rajan will be certainly made in media. It is natural thing for media, two public officials could not escape from a comparison, and it happens in every country, India is not a unique case. Rajan was governor for three years and was very vocal about general issues pertaining in the country at that time. Contrary to previous governors of RBI who refrained from commenting on issues which fall outside their professional role, Raghuram Rajan presented his opinion on almost every major issue. Urjit Patel is back with the tradition of keeping a low profile in media.
It is important for government officials to not speak on public issues like an academician or public intellectual does because irrespective of his/her intentions, comments on issues could be related to his professional work and could impact the markets. This is the reason that government does not allow public officials to comment on public issues. The comments by RBI governor on public issues could impact stock markets and overall perception about economic prospects of the country. Some sections of media criticized Urjit Patel for being incompetent in comparison to ‘the rockstar governor’ Raguram Rajan because he neither resisted to demonetization nor he comments on public issues. Opposition has also accused Urjit Patel for compromising with autonomy of RBI and doing everything what government wants him to do.
The accusation by sections of media which loves ‘the rockstar governor’ because he gives headlines to them is not backed by facts. On the demonetization move, Section 26(2) of the Reserve Bank of India Act makes it very clear that withdrawal of legal tender is completely the area of government. RBI could make suggestions but the government is free to accept or refuse them. So, government could have gone with demonetization whether RBI agrees to it or not. The debate on demonetization could go on for whatever time period but accusing Urjit Patel for that is ignorance of facts. On the competency front, Patel got his Bachelors degree in Economics from London School of Economics, M Phil in Economics from Oxford University, and doctorate from Yale University. As a professional, he has had exposure to the International Monetary Fund, department of economic affairs in the ministry of finance, the Boston Consulting Group and even a short stint at RBI. On the other hand, Raghuram Rajan got his graduation degree in Engineering, masters in business administration and then moved to core economics for doctorate from Massachusetts Institute of Economics. So, in terms of academic achievement or professional experience, Patel is as competent as Rajan, if not more so.
In decision making at RBI and maintaining the autonomy of RBI, Urjit Patel has done excellent an job. He played instrumental role in shifting interest rate decisions to monetary policy committee (MPC) to democratize it. He headed the committee which decided that India should adopt inflation targeting as their framework for monetary policy. He continued the war on inflation started by Raghuram Rajan and has been able keep it within RBI target (4% +/- 2%). He did not succumb to constant pressure from finance ministry to keep interest rates low for healthy growth. Former chief economic adviser Arvind Subramanian even criticized RBI for keeping interest rates too high to combat inflation. Urjit Patel criticized farm loan waivers in almost every press conference of RBI and called them serious moral hazard and ‘inflationary’.
So, the media criticism of Urjit Patel because he keeps low profile and does not give front page headlines every weeks in complete ignorance of facts. The media is trying to show that every institution is being compromised under Modi government. The real target for them is government rather than RBI or Urjit Patel.