CENTRAL banks need the confidence of investors to function well, so questions about their leadership and independence are seldom welcome. On August 20th Narendra Modi, India’s prime minister, belatedly appointed a new head of the Reserve Bank of India (RBI), nine weeks after Raghuram Rajan, the incumbent, surprised everyone by announcing he was stepping down. The new man, Urjit Patel, was an understudy to Mr Rajan—prompting plenty to wonder why the original cast member was, in effect, forced out.
Beyond the usual way stations for central bankers—Yale, Oxford, a period at the IMF—Mr Patel was once a management consultant and an executive at Reliance Industries, a group headed by Mukesh Ambani, India’s richest man. He has been a deputy governor of the RBI since 2013.
India’s newish inflation-targeting framework, which has been successful in stemming rising prices (helped by outside factors such as falling oil prices), is as much his as Mr Rajan’s. So is the upcoming arrangement whereby interest rates will be set by a panel comprising government and RBI appointees, rather…Continue reading