The New RBI Governor Candidates: Hawks or Doves?

Here’s an analysis of the track record of some of the main candidates in the running for the next RBI Governor.

One of the main complaints about Reserve Bank of India (RBI) Governor Raghuram Rajan has been that he held interest rates too high for too long.

So, will his successor be any different?

Nomura, a global research firm analysed the track record of some of the main candidates in the running.

Arvind Subramanian, Chief Economic Advisor, Government of India

• According to Nomura’s assesment, Arvind Subramanian is dovish on policy matters.
  
  
• In 2015, he argued that the GDP deflator was a better measure of the monetary policy stance.
  
  
• Subramanian has said that solving the bad loan problem in a high interest rate environment is a difficult task.
  
  
• He also believes that the RBI will be able to meet its 5 percent inflation target by March 2017.
  
  
• He wants India to consider targeting $750-1,000 billion of forex reserves in the long-run.
  

Urjit Patel, Deputy Governor, RBI

• He is currently Deputy Governor in charge of Monetary Policy, and is perceived as being the most hawkish among the contenders.
  
  
• He recommended targeting consumer inflation at 4 percent +/- 2 percent.
  
  
• He is fiscally conservative, and has argued that the government’s expenditure policy should support disinflation.
  

Shaktikanta Das, Economic Affairs Secretary, Finance Ministry

• As one of the key secretaries of the Finance Ministry, Shaktikanta Das’ personal views are not well known.
  
  
• But Nomura reckons that Das is neutral on monetary policy and conservative on the fiscal front.
  
  
• Post the 2016-17 budget, Das said more more spending could lead to concerns over debt sustainability.
  
  
• Post RBI’s April rate cut, he said India needs low rates to boost manufacturing and infrastructure.
  

Rakesh Mohan, Former Deputy Governor, RBI

• Rakesh Mohan falls right in the middle of the spectrum.
  
  
• He has supported increasing public spending in infrastructure, and wants to increase efficiency in tax revenue collection.
  
  
• He has argued that inflation targets may not be suitable for India due to the presence of interest rate discrepancies and other supple-side factors.
  

Subir Gokarn, Former Deputy Governor, RBI

• Nomura says Subir Gokarn is inclined towards ‘balancing’ growth and inflation objectives. Hence Gokarn is slotted in the neutral category.
  
  
• Gokarn has argued that bringing inflation under control is critical to sustain growth over the medium term.
  
  
• He has been a proponent of fiscal prudence, saying that growth and fiscal consolidation go hand in hand.