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6Th September 2016
In keeping with the low-key style he
is known for, Reserve Bank of India's new Governor Urjit Patel began his first
working day on Tuesday away from media spotlights, unlike the practice followed
by RBI governors in the past. There were no milling photographers at the
"handover".
Patel had officially assumed charge
on Sunday when the term of his predecessor Raghuram Rajan expired. Monday was a
holiday here on account of the Ganesh Chaturthi, which kicked off the 10-day
Ganesh festival.
The Total Investment & Insurance Solutions
An RBI spokesperson said photographs
of the official ceremony of Patel assuming office would be released later on
Tuesday.
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Patel has taken over the bank's
charge from Rajan after serving as RBI Deputy Governor since January 2013.
He has also worked at the
International Monetary Fund (IMF), and was a consultant to the Union Finance
Ministry from 1998 to 2001.
The RBI said Patel has a Ph.D. in
Economics from Yale University, an M.Phil. from the University of Oxford and a
B.Sc. from the University of London.
Following his departure from the
RBI, Rajan on Monday cautioned governments and central bankers across the world
against relying too much on low interest rates to propel growth or use it as a
substitute for undertaking key structural reforms in the economy.
He told the New York Times in an
interview that lower policy rates are often an easy solution. However, these
can trap economies in a fear of psychosis that when they normalise the rates
eventually could hurt growth and distort markets, thereby making a low interest
rate policy difficult to abandon. The Total Investment & Insurance
Solutions
When Rajan took charge at the RBI in
2013, at a time the US Federal Reserve had declared its intent to wind down its
stimulus programme, the rupee plunged in value in respect of the US dollar on
fears about a spiralling current account deficit.
In a series of measures, Rajan
managed to stabilise the currency that also brought back investors to the
country.
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"Rajan's disciplined and
focussed approach in leading the Reserve Bank during his first year as governor
was remarkably impressive," British magazine Central Banking said while
awarding Rajan its 'Central Banker of the Year' award for 2015.
Predicting the 2008 financial
meltdown that is still affecting global economy, Rajan in 2005 argued that
increasingly complex markets with myriad instruments of credit and
mortgage-backed securities in ever greater quantities made the global financial
system a risky place.
Almost a decade down the line, Rajan
is stronger in his belief that global markets now are at the risk of a crash
due to the competitive loose monetary policies being adopted by developed
economies.
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Pointing to the very low interest rate
policies of the US Federal Reserve, the Bank of Japan and the Bank of England
in a bid to stimulate their economies, Rajan has been warning that emerging
markets are especially vulnerable to big shifts in capital flows triggered by
the unprecedented monetary accommodation in rich countries. The Total Investment
& Insurance Solutions
The elevation of Urjit Patel as
Governor has naturally raised expectation among those who were critical of
Rajan for not easing enough the monetary policy by cutting rates.
When talking about the challenges
for Patel as the Governor, it should also be kept in mind that his moorings are
as monetarist as his predecessor Rajan's were, and he is considered to attach
the same importance to inflation control as did Rajan. The Total Investment
& Insurance Solutions
His views on monetary policy were
expressed at the time Rajan held rates in the February 2015 review after making
an unexpected rate cut a month edarlier -- the first in nearly two years.
Patel at the time elaborated on the
"important backdrop" to Rajan's move to hold rates.
"We are in the midst of the age
of competitive depreciation and of a beggar-my-neighbour philosophy. It brings
to mind an old African saying that when elephants fight, the grass
suffers," Patel said at a press conference to announce the policy review,
on the trend of accommodative monetary policies being adopted by developed
economies.
The Total Investment & Insurance Solutions
"While the ECB (European
Central Bank) and the Bank of Japan are printing money and devaluing their
currencies on one hand, the US economy is reviving on the other. Anyone in the
middle is getting crushed," he pointed out.The Total Investment
& Insurance Solutions
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