Confident Urjit Patel Will Carry Forward Inflation Fight: Raghuram Rajan
Reserve Bank of India Governor Raghuram Rajan is confident that his newly announced successor Urjit Patel will guide the Monetary Policy Committee towards achieving India's inflation target.
Rajan said on Friday that despite a high inflation reading in July, he has no doubt that inflation will fall in the coming months, before backing the government's decision to appoint his deputy as his successor. He was delivering a lecture at the Foreign Exchange Dealers' Association of India.
The key point is that market participants know that the Monetary Policy Committee has to maintain low and stable inflation, certainly over the next five years for which its remit has been set, and it will do what it takes.Raghuram Rajan at FEDAI
As per a government notification, RBI is required to get headline inflation down to 4 percent by March 2018, with a two percentage point leeway on either side. The appointment of Patel, who is not seen to be as outspoken as Rajan and who has been rarely heard in his three years as the deputy governor of RBI, has led to speculation over the stance that he takes in fighting inflation.
With multiple rate hikes after taking over as the RBI chief in September 2013, Rajan and his team have been credited with containing inflation as also turning the direction of the monetary policy in early 2015 to accommodate growth concerns.
Many watchers have pointed to the fact that Patel headed a panel which recommended a shift in RBI's outlook to an inflation-targeting central bank and his work with Rajan on the inflation front will make him continue the same agenda.
In a rare intervention, Patel had refused to get bracketed either as a hawk or a dove, and used the same ornithology-inspired analogy to compare it with an owl, which is always watchful.
Another development, according to Rajan, due to which debt markets have become attractive, is the reluctance of Public sector banks to lend, and pass through rate cuts into bank lending rates. He pointed out how firms have started to give banks a miss due to this.
No wonder highly rated firms are bypassing banks to borrow from the commercial paper markets, with outstanding commercial paper having more than doubled in the last two years to over 3 lakh croresRaghuram Rajan at FEDAI
(With inputs from PTI)
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