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

Out of the four names that were in the race for the RBI top job, the choice was finally down to two. The final pick was between Subir Gokarn, the executive director of International Monetary Fund, and Urjit Patel, deputy governor at the RBI.

Patel’s selection has left many surprised because elevating him to governor in a way only reinforces some of the criticisms that were levelled against Rajan, that questioned his "Indianness" and hawkish policy stance. Beacause Patel, perhaps, is far less "Indian" than Rajan if we consider the fact that he took an Indian citizenship only after he was offered the post of RBI deputy governor by UPA 2 in 2013. Before that, Patel was a citizen of Kenya.

On the other hand, Rajan was always an Indian citizen.

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

The message with this appointment is once again an iteration of the global nature of India’s economy and that the government is looking beyond the usual tags of nationalism. It also shows that the government is genuinely interested in hiring real talent for the top job.

The consensus was also clear that the government wanted an economist, and not a banker, to lead the central bank. Patel, of course, met that criterion, as did many others.

Patel has also worked with the Reliance Group, Infrastructure Development Finance Company and Gujarat State Petroleum Corporation Limited.

Another signal that goes out with this appointment is that the government is not, and will not be pushing for a dovish monetary policy (lower interest rates) and is not looking for a quick fix approach to the economy. It is, instead, taking a sustainable, long-term view.

Also read: No parting gift, no parting shot, Raghuram Rajan signs off

Patel is one of the chief architects of India’s monetary policy framework. He was the one who suggested that India should adopt Consumer Price Index (CPI) as a measure of inflation, and that inflation should be the nominal anchor for the monetary policy framework.

The expert committee headed by Urjit Patel explicitly stated in the report: "The nominal anchor should be defined in terms of headline CPI inflation, which closely reflects the cost of living and influences inflation expectations relative to other available metrics..." "This target should be set in the frame of a two-year horizon that is consistent with the need to balance the output costs of disinflation against the speed of entrenchment of credibility in policy commitment."

For those who are trying to understand the mind of prime minister Narendra Modi, Patel’s selection perhaps offers a clear indication of a departure from swadeshi rhetoric in managing India and its economy.