Reserve Bank of India (RBI) Deputy Governor Urjit Patel on Saturday won a promotion to run the central bank with a mandate to cement the bank’s commitment to keeping inflation low, as the tenure of the man he is replacing draws to a turbulent conclusion.
Raghuram Rajan, a former International Monetary Fund chief economist feted as a “rock star” central banker by investors, took financial markets by surprise in June by announcing he would return to academia after a single term as head of the RBI.
Indian Prime Minister Narendra Modi ended two months of ensuing uncertainty by picking Patel, 52, who has been a driving force behind the RBI’s transformation into an inflation-targeting central bank.
Patel’s appointment will reassure markets by offering the promise of monetary policy continuity just as inflation ticks higher, though he is likely to face pressure from government officials who would like interest rates to come down.
“He is the architect of inflation targeting. Investors do not want any change in policy direction,” India Ratings and Research chief economist Devendra Kumar Pant said.
Patel will also need to address a cleanup of bad debts at banks that has prevented credit from flowing into India’s US$2 trillion economy, which is one of the world’s fastest growing, but is not generating enough jobs to cater for an expanding workforce.
At home, he is seen as carrying less political baggage than Rajan, which might help Patel in his dealings with Modi and Indian Minister of Finance Arun Jaitley.
Rajan faced a backlash from hard-right elements in Modi’s Bharatiya Janata Party (BJP) for the social criticism he sometimes resorted to in his public statements. Patel is little known on the conference circuit and has refrained from making major policy speeches while deputy governor.
“He [Patel] should continue to work with the government on reducing long-term inflation expectations and maintain stability in the currency,” said Mihir Vora, chief investment officer of Max Life Insurance in Mumbai.
“The measures to address [non-performing asset] issues of public-sector banks should continue,” he added. “However, a lot more needs to be done to lay out a plan for capitalizing these banks.”
Patel is scheduled to start his three-year term on Sept. 4.
An aide to Modi praised Patel as “young and dynamic” and with a wide international policy perspective. Patel also worked at the IMF as an economist from 1990 to 1995, and for Boston Consulting Group and Indian conglomerate Reliance Industries.
Patel takes over at a time when consumer inflation accelerated to 6.07 percent last month, the fourth consecutive month above the RBI’s near-term target of 5 percent.
Analysts said bond markets would likely fall initially given expectations Patel, like Rajan, would keep interest rates on hold in the near term.
The government is soon expected to announce the lineup of the six-member Monetary Policy Committee to decide on interest rates. It will be made up of Patel and two other RBI officials, along with three members appointed by the government.
That arrangement might benefit from the presence of a consensus-builder in the mold of some central bank heads in developed markets. However, some within the RBI describe Patel as a moody man who avoids social interaction and huddles only with close aides.
“He has an abrasive personality,” said one RBI official who has worked with him. “At a time when RBI policy will be decided by a monetary policy committee, good communication skills are a necessity, which are lacking in him.”
FALLING BEHIND: Samsung shares have declined more than 20 percent this year, as the world’s largest chipmaker struggles in key markets and plays catch-up to rival SK Hynix Samsung Electronics Co is laying off workers in Southeast Asia, Australia and New Zealand as part of a plan to reduce its global headcount by thousands of jobs, sources familiar with the situation said. The layoffs could affect about 10 percent of its workforces in those markets, although the numbers for each subsidiary might vary, said one of the sources, who asked not to be named because the matter is private. Job cuts are planned for other overseas subsidiaries and could reach 10 percent in certain markets, the source said. The South Korean company has about 147,000 in staff overseas, more than half
Taipei is today suspending its US$2.5 trillion stock market as Super Typhoon Krathon approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed-income trading, statements from its stock and currency exchanges said. Yesterday, schools and offices were closed in several cities and counties in southern and eastern Taiwan, including in the key industrial port city of Kaohsiung. Taiwan, which started canceling flights, ship sailings and some train services earlier this week, has wind and rain advisories in place for much of the island. It regularly experiences typhoons, and in July shut offices and schools as
An Indian factory producing iPhone components resumed work yesterday after a fire that halted production — the third blaze to disrupt Apple Inc’s local supply chain since the start of last year. Local industrial behemoth Tata Group’s plant in Tamil Nadu, which was shut down by the unexplained fire on Saturday, is a key linchpin of Apple’s nascent supply chain in the country. A spokesperson for subsidiary Tata Electronics Pvt yesterday said that the company would restart work in “many areas of the facility today.” “We’ve been working diligently since Saturday to support our team and to identify the cause of the fire,”
TECH PARTNERSHIP: The deal with Arizona-based Amkor would provide TSMC with advanced packing and test capacities, a requirement to serve US customers Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is collaborating with Amkor Technology Inc to provide local advanced packaging and test capacities in Arizona to address customer requirements for geographical flexibility in chip manufacturing. As part of the agreement, TSMC, the world’s biggest contract chipmaker, would contract turnkey advanced packaging and test services from Amkor at their planned facility in Peoria, Arizona, a joint statement released yesterday said. TSMC would leverage these services to support its customers, particularly those using TSMC’s advanced wafer fabrication facilities in Phoenix, Arizona, it said. The companies would jointly define the specific packaging technologies, such as TSMC’s Integrated
RSS