Patel resigned at sensitive time
Shaktikanta Das, a former economic affairrs secretary from 2015 to 2017, was appointed governor of the Reserve Bank of India (RBI), a day after Urjit Patel resigned.
It was the fastest process of filing the post, financial industry observers said.
Das is currently a member of the Finance Commission of India and the government’s representativeat the Group of 20 Summits.
Citing personal matters, Patel resigned immediately on 10 Dec 2018, which observers said was at a sensitive time and reflected on the discord between the central bank and the government in New Delhi.
Commenting on the sudden departure of Patel, Singapore’s DBS bank said it came at a sensitive time, when negotiations with the government to iron out differences on key regulatory aspects are ongoing.
DBS pointed out that the first of these discussions (negotiations) in November had seen the RBI cede some control to the government’s proposed committees, with a decision on liquidity due later this month.
“Timing of the Governor’s resignation and the already-cautious mood in the markets following yesterday’s exit polls, to be followed by today’s actual count for the state elections, will dampen sentiments,” said DBS economist Radhika Rao in comments on Indian affairs.
The Indian Rupee is likely to weaken past 72/USD as Non-Deliverable Forward (NDFs) suggest, with 10 Dec 2018’s equity sell-off to seek further downside.
But other analysts said the Rupee had wind-tail of lower crude oil prices as it eases import costs.
Beyond sentiments, markets will seek clarity on Governor Patel’s successor, with the likelihood that one of the current Deputy Governors might take over the mantle.
On policy, the RBI might soften its stance to adopt a more neutral-to-dovish approach as inflation continues to undershoot the 4% target and growth rolls off its peak.
“Markets are likely to price in a shift to neutral stance as early as the February 2019 meeting, which the narrative increasingly swinging towards cuts if inflation stays below 4% and global oil shows little signs of revival,” said Rao. fiinews.com
