03 July 2020 ~ 0 Comments

Urijit back at policy helm; will Rajan return next?

The Covid-19 pandemic has made friends of erstwhile foes! Urjit Patel, who left 18 months ago after a fractious tenure as RBI Governor, is back as chairman of the National Institute of Public Finance and Policy (NIPFP). In 2018, he had resigned barely four days before a crucial meeting of the board of RBI that would have discussed the central bank’s simmering differences with the Modi sarkar. Patel replaces former bureaucrat Vijay Kelkar who helmed NIPFP for six years and will have a four-year tenure.

Why has the government brought back an economist with whom it had major differences, and whose tenure at the RBI was marked by a running battle between Patel and the Finance Ministry on various issues? Clearly, much has changed since then. The economic slowdown coupled now with the havoc wreaked by the coronavirus outbreak has limited the options of the government. Its present set of advisors on matters economic have not been able to chart a new course. So, the government has been forced to fall back on those people who it had once forcefully ejected because their ideas did not match those of the ruling dispensation, or they were unwilling to do the government’s bidding.

It appears that the Modi sarkar is now trying to make the best of an unhappy situation. Clearly, the Centre wishes to draw upon Patel’s experience as it navigates policy in these turbulent times. Apparently, there is also mounting pressure to bring back Raghuram Rajan, Patel’s predecessor at the RBI who too had quit because he couldn’t get along with the powers that be, most notably on the issue of demonetization.

Hopefully, Patel’s second innings with the Modi sarkar will be a smoother affair.

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