Urjit Patel is the new governor of the Royal Bank of India (RBI), and he has some heavy responsibilities to bear and a very large pair of shoes to fill. He is not unqualified, however, what happens in and to India will depend on how well he stands up to pressure from the Indian government.
RBI’s main job is to control inflation.With consumer prices rising close to the top of RBI’s target range of 2 to 6% s a year, Patel concludes that there is no scope for lower interest rates.
In the agricultural area, there are food shortages caused by poor rural infrastructure, assorted supply side bottlenecks and government incentives that encourage farmers to plant unsuitable crops.Hence there is an upward pressure on food prices.
The government has implemented a new national goods-and-service tax. This would do the country well. They also are going to privatise inefficient state companies and this will raise money and enable the economy to be more productive. They will also focus on state-owned banks which are responsible for 70% of lending. By doing this, they will free up resources to recapitalise banks with stronger foundations.
In conclusion, it is crucial that the Indian government stays independent from the RBI.