August 22, 2016

India's Not-So-New Central Banker

The Indian government’s decision to elevate a well-respected deputy governor at the Reserve Bank of India to become the country’s next central banker is, frankly, a bit of a relief. The naming of Urjit Patel comes after months of quite unnecessary drama -- first over whether current RBI chief Raghuram Rajan and the government were getting along, then whether Rajan would be granted an extension, next whether he would quit in irritation and finally over who would replace him.

There’s a more important reason for relief as well: Choosing Patel suggests that the government supports or at least is content to continue with Rajan’s policies at the RBI, some of which Patel helped to develop and implement. Patel led the team that worked out how to implement inflation targeting in India: It was on the basis of his report that the RBI and the government agreed earlier this year that consumer price inflation would henceforth be the central bank’s sole target.


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