Market waiting to see who govt picks as Urjit Patel's replacement: JPMorgan

Jahangir Aziz of JPMorgan, while reacting to Urjit Patel's resignation, said that the market will wait to see who the government chooses for the post of RBI governor.

In a surprising move, the Reserve Bank of India (RBI) governor Urjit Patel on December 10 resigned with immediate effect. His three-year term was to end in September 2019. He is the first governor since 1992 to leave in around 2 years.

"I think the incidents in the foreign markets are being mostly in-line with what one would expect with a sudden resignation of a central bank governor ... I think the foreign institutional investors (FIIs) will wait to see how decisions pan out. The first thing that they will wait to see is who the government chooses as the next governor of RBI. Back in 2013, the appointment of Raghuram Rajan brought down the risk premium on India significantly simply because of the credibility of the person involved. Urjit’s appointment was seen as a continuation of Raghuram Rajan’s policies and we saw risk premium getting contained. The first thing that the market will be looking for is who is the person who replaces Urjit Patel,” said Aziz.

Speaking about growth, Aziz said, “There are two separate stories on growth at this point of time. There is a structural story about growth which we have seen playing out and we have used all sorts of ad-hoc arguments- demonetisation, the effects of demonetisation, etc. trying to explain that, none of these explanation work, you need to go back and start questioning the structural nature of the things that have been done by this government and the fact that globalisation on which India relied massively. From 2004 to 2012-2013 globalisation as a support for growth is no longer there. We do not pay enough attention to the fact that India is an extremely open economy depended massively on what happens to global trade. That is the structural part of the story.”