Why Modi chose Urjit Patel as RBI governor

How the governor of the Reserve Bank of India came to be finalised is an interesting story.

Urjit Patel was Prime Minister Narendra Modi’s first choice for the top job, according to the first tweet from the closed circle of officials privy to the process of selection.

The appointment had to be made based on the recommendation of the Financial Sector Regulatory Appointments Search Committee (FSRASC), headed by the cabinet secretary. The committee undertook an extensive exercise to suggest a panel of names to the Appointments Committee of Cabinet (ACC)

Also read: Goodbye, Raghuram Rajan. Good luck, Urjit Patel

There were at least six names before the committee [ACC] that did the shortlisting. The ACC had to pick some and leave some to start with.

The names that got picked were Urjit Patel, Arvind Subramanian and Kaushik Basu - the first, the present RBI deputy governor; the second, the current Chief Economic Adviser (CEA) and the third, of course, some of us may remember as the former CEA.

The names that had to be left out in the first round were Arundhati Bhattacharya, SBI chief; Subir Gokaran, who was deputy governor, RBI some time ago, but presently at World Bank; and Shaktikanta Das, the present economic affairs secretary and an old hand at budgets, including the first Modi Budget.

Also read - Talent matters, not nationalism: Modi's message in hiring Urjit Patel

There was an hour-long meeting between the PM and finance minister Arun Jaitley, a week before the actual process of selection commenced over the appointment of a new RBI governor, a post that will fall vacant on September 4. It is to be noted that the FM was not a part of the committee of selection.

After Raghuram Rajan having opted out already from continuing for a second term, the three under consideration were Urjit Patel, Arvind Subramanian and Kaushik Basu.

Senior officials familiar with the ACC’s selection process confided that Patel was chosen by Modi himself at first to be a contestant. In the second round, the choice had come down to a contest between Urjit Patel and Arvind Subramanian. Officials are believed to have said later that Patel was the final pick since he was always Modi’s first choice.

The reason, it is believed, is that Modi was particular to have a chief from within the RBI itself. This is not to understate the competence of any of the contestants and rank them second or last.