RBI Guv Urjit Patel discusses economic situation with FM Jaitley ahead of monetary policy review
The meeting assumes significance as the government has to appoint its three nominees on the six member Monetary Policy Committee (MPC) which will determine interest rate keeping in view that inflation stays within the given target of 4 per cent.
- Sep 9, 2016,
- Updated Sep 9, 2016 9:32 AM IST
Reserve Bank Governor Urjit Patel on Thursday called on Finance Minister Arun Jaitley in the national Capital and is believed to have discussed the prevailing economic situation. It was Patel's first meeting with the Finance Minister after being appointed as the Governor.
The next monetary policy review is on October 4 "when we will talk", Patel told reporters after the meeting.
The meeting assumes significance as the government has to appoint its three nominees on the six member Monetary Policy Committee (MPC) which will determine interest rate keeping in view that inflation stays within the given target of 4 per cent, with a margin of 2 per cent on the either side. The other three members are from RBI, including the Governor.
Patel assumed charge of RBI Governor effective September 4, 2016, after serving as Deputy Governor since January 2013. Calling Urjit Patel a "competent economist", Finance Minister Arun Jaitley on Tuesday expressed hope that as the next RBI Governor he will be able to contain inflation and contribute in country's economic growth.
"Dr Patel is a competent economist, a monetary economist. He has worked in various capacities in RBI. I believe that he will be able to contain inflation with Monetary Policy Committee to assist him. He also contribute to country's economic progress," Jaitley had said in an interview.
Patel has been holding charge of the monetary policy decisions of the central bank. The government has notified monetary policy framework agreement under which the RBI will target to contain inflation at 4 per cent with an upper and lower tolerance band of 2 per cent.
The six-member monetary policy committee will decide on interest rates based on this inflation target.
On Rajan, Jaitley had said there were no differences between the outgoing Governor and the government, and the relations were cordial. The Finance Minister had said Rajan has done his job well.
Outgoing Governor Raghuram Rajan is said to have shared a cordial relationship with Prime Minister Narendra Modi and Finance Minister Arun Jaitley. However, his public comments on matters outside his official brief and personal attacks on Rajan by a member of the ruling party had caused discomfort on both sides.
The central government will seek to avoid any situation that will lead to a deterioration of the institutional association between the government and RBI. To that end, Patel seems like a perfect candidate. Patel is known to be reticent in public and reserved in his opinions, and hence it is expected that apart from issues related to monetary policy and the economy, he will not speak on controversial issues.
Sources say there is no question of compromising with the central bank's independence. "There will always be differences between the governor and the finance minister on growth and inflation issues because of the nature of their responsibilities. There is institutional respect on both sides," said an official.
Patel is known to share Rajan's views on a number of issues, including inflation targeting, liquidity in the banking system and RBI's role in the currency markets.
However, on other areas like the crippling level of non-performing assets, and the best way to clean up the bank balance sheets, he has not said much. So, it remains to be seen what sort of a comfort level the government and RBI have on these issues.
A panel led by Patel was the first one to propose inflation targeting. The new governor is an inflation hawk and the Centre will look for a fresh start on that front with the soon-to-beformed monetary policy committee.
Reserve Bank Governor Urjit Patel on Thursday called on Finance Minister Arun Jaitley in the national Capital and is believed to have discussed the prevailing economic situation. It was Patel's first meeting with the Finance Minister after being appointed as the Governor.
The next monetary policy review is on October 4 "when we will talk", Patel told reporters after the meeting.
The meeting assumes significance as the government has to appoint its three nominees on the six member Monetary Policy Committee (MPC) which will determine interest rate keeping in view that inflation stays within the given target of 4 per cent, with a margin of 2 per cent on the either side. The other three members are from RBI, including the Governor.
Patel assumed charge of RBI Governor effective September 4, 2016, after serving as Deputy Governor since January 2013. Calling Urjit Patel a "competent economist", Finance Minister Arun Jaitley on Tuesday expressed hope that as the next RBI Governor he will be able to contain inflation and contribute in country's economic growth.
"Dr Patel is a competent economist, a monetary economist. He has worked in various capacities in RBI. I believe that he will be able to contain inflation with Monetary Policy Committee to assist him. He also contribute to country's economic progress," Jaitley had said in an interview.
Patel has been holding charge of the monetary policy decisions of the central bank. The government has notified monetary policy framework agreement under which the RBI will target to contain inflation at 4 per cent with an upper and lower tolerance band of 2 per cent.
The six-member monetary policy committee will decide on interest rates based on this inflation target.
On Rajan, Jaitley had said there were no differences between the outgoing Governor and the government, and the relations were cordial. The Finance Minister had said Rajan has done his job well.
Outgoing Governor Raghuram Rajan is said to have shared a cordial relationship with Prime Minister Narendra Modi and Finance Minister Arun Jaitley. However, his public comments on matters outside his official brief and personal attacks on Rajan by a member of the ruling party had caused discomfort on both sides.
The central government will seek to avoid any situation that will lead to a deterioration of the institutional association between the government and RBI. To that end, Patel seems like a perfect candidate. Patel is known to be reticent in public and reserved in his opinions, and hence it is expected that apart from issues related to monetary policy and the economy, he will not speak on controversial issues.
Sources say there is no question of compromising with the central bank's independence. "There will always be differences between the governor and the finance minister on growth and inflation issues because of the nature of their responsibilities. There is institutional respect on both sides," said an official.
Patel is known to share Rajan's views on a number of issues, including inflation targeting, liquidity in the banking system and RBI's role in the currency markets.
However, on other areas like the crippling level of non-performing assets, and the best way to clean up the bank balance sheets, he has not said much. So, it remains to be seen what sort of a comfort level the government and RBI have on these issues.
A panel led by Patel was the first one to propose inflation targeting. The new governor is an inflation hawk and the Centre will look for a fresh start on that front with the soon-to-beformed monetary policy committee.