In turns out Prime Minister Narendra Modi did not take my advice and appoint Dr. Gita Gopinath as Central Bank governor, but instead opted for the safe route. What a shame. Maybe I was being a little romantic or even delusional to think that a rock star Prime Minister would replace a rock star Central Banker, with another first-rate appointment. Instead he opted for rock salt.
So who is Dr.Urjit Patel? Well, for starters, he is the number two man at the RBI currently and will no doubt follow in Mr. Raghuram Rajan’s footsteps, but there’s nothing very exciting about that. We need someone to burst onto the global stage and say here I am, and here’s what I am going to achieve. Dr. Gopinath would have done just that. She is an incredible rising star and three quarters of the way to becoming a rock star. Her appointment to the RBI would have bestowed that honor upon her. But I suppose she will now have to wait her turn.
So I did my research on Dr. Patel, and the first thing that struck me was that he received his bachelors from the London School of Economics. That’s the first bad sign. When I was at university in England, those that went to the LSE were either rabble-rousers or communists, as were most of the professors. Anyone remember Tariq Ali? Maybe I am being too harsh on the man – he very well may have mellowed out. We shall see.
Since his appointment was announced on 22 August the Indian markets have yawned and the newspapers have scrambled to find out everything they can about him. In one paper published in 2003 that was recently uncovered, he advocated for the Government of India to divest itself of their ownership interests in public sector banks saying, “The system of intermediation will not improve appreciably in the absence of any serious steps towards changing incentives blunted by public sector involvement (of which ownership is an important aspect). To sharpen these incentives, outright privatization may not be sufficient, but it is necessary.” Okay, on second thought I take back my previous comment about a ‘bad sign.’
Dr. Patel is known as an inflation hawk and will no doubt peruse his predecessor’s goals of reigning in inflation, which has over the years been a huge drag on the economy. That’s all well and good, but India needs some kerosene thrown on the economic fire. Yes, GDP growth is around 7.6% but in my opinion, it could be much higher especially now that the price of oil is so low. And no, I am not talking about quantitative easing, but I do want all the shackles holding the Indian economy to be removed.
Mr. Modi is aggressively tackling rules and regulations, but I would like the RBI to do its part in not solely focusing on inflation, but relaxing monetary restraints put in place over the decades. After Dr. Patel’s announcement the markets have essentially flat lined, and I too feel a little let down. But had the appointment gone to Dr. Gopinath, you would have seen fireworks in the sky and people like Bharatiya Janata (BJP) party leader Swamy Subramanium rejoice. After all, how can Dr. Patel possibly be Indian enough for Swamy being that he was born in Kenya?
Peter Kohli is the CEO of DMS Funds.