A giant leaves RBI

In his last assignment as DG, Patra handled a bunch of  responsibilities of RBI that directly shaped everyone of the above functions.

Last week saw the ending of the term of Michael Patra as deputy governor of the Reserve Bank of India. This brings the curtains down on almost an era at RBI. The RBI's defining role is that it is the monetary authority of the country- the creator of money, the regulator of the cost of money and the guardian of the value of money - internally by influencing inflation through interest rates and liquidity and externally by its intervention in the foreign exchange market.

In his last assignment as DG, Patra handled a bunch of responsibilities of RBI that directly shaped everyone of the above functions. He headed the Monetary Policy Department, including Forecasting and Modelling Unit, the Financial Markets Operations Department, Financial Markets Regulation Department including Market Intelligence, International Department, Department of Economic and Policy Research, Department of Statistics & Information Management, Corporate Strategy and Budget Department as well as the Financial Stability Unit.

Literally therefore he was at the heart of RBI's role of fixing and guarding the value of the rupee for nearly a decade. To a large extent, Dr Patra should get the credit of fashioning the Reserve Bank as an inflation targeting central bank. Of course, the move should and did have the ideological buy-in of the central government especially finance ministers Arun Jaitley and Nirmala Sitaraman as also RBI governors Raghuram Rajan, Urjit Patel and Shaktikanta Das. But once the buy-in was accorded, Patra had a huge role in navigating the Urjit Patel committee report on the inflation targeting framework.

Thereafter he has been the only individual who has been member of the monetary policy committee for all the meetings since October 2016, when the MPC was first formed up to it's last meeting on Dec 6-8,2024 - a total of 50 meetings in all. The February 2025 meeting will be the first MPC meeting not to have Michael Patra in attendance. In every way therefore, the successful running of the inflation targeting framework owes a lot to Patra's contribution.

But that's only the tip of the iceberg. Patra is one of the most competent and qualified macroeconomists in the country with wide global recognition from the academic and the central banking community, a recognition that spread far beyond his role as an RBI deputy governor. His command over the technicals of macroeconomic theory was complete. He could, in a jiffy, write down the Taylor rule equation to prove a point about the neutral real rate for the Indian economy and just as elegantly quote the Laffer curve to argue a point on fiscal policy. From Harrod Domar to the Lewis model, from Keynesian theory through neo-Keynesian to Modern Monetary theory, Patra was the master of them all. But even better was his ability to relate theory to the economic reality of the day.

Many a business journalist and market economist have wieried of his ability to change his view on the direction of the economy when least expected. But that's the peril of the profession that Patra practised to perfection. Invariably the RBI works out the policy it decides to pursue given the economic, political and global exigencies of the day, and it is often left for Patra and his department to stitch the narrative to defend the decision.While the monetary policy statement and the governor's q&a form the key takeaways for the market, the swift one liners from Patra in the press conference are always closely watched by the market to glean which way the wind is blowing.

The policy is but one moment in time. Patra's inputs as deputy governor shaped the daily value of the rupee from his influence on the quantum of repos or reverse repos, the RBI decision to do or not do OMOs or open market sales or purchases of bonds and even more importantly its intervention in the forex market via swaps or spot purchases or sales of dollars. To be sure the RBI's role in keeping the exchange rate too steady last year or the rupee liquidity too tight has been blamed on Patra as a key maker of RBI policy. The RBI's inability or unwillingness to recognise or correctly forecast the economic slowdown in the second quarter also earned the central bank in general and Patra in particular many a private innuendo.

Clearly unpredictable global and weather exigencies didn't work in RBI's favour. But in the larger scheme of things, if RBI is today globally perceived as one of the most sophisticated central banks, a slice of that victory cake goes to the likes of Patra who silently toil away at the numbers and the language of the RBI communication.

Speaking of communication, Patra will be missed as much for his command over the English language. He reportedly read and edited every major report released by RBI like its bulletins, its research reports, the Financial Stability Reports and more. Indeed, the "state of the economy" article in every RBI monthly bulletin is perused by RBI reporters not just for a nowcast or a forecast that Dr Patra knowingly slipped between the lines but also for the sheer poetry of the introduction and the conclusion. The latest January bulletin ends with a quote from Tennyson's Ulysses where Patra may well be referring to himself, " Winter has its music too - one last crescendo to rage against the dying of the light....We may not be the strength that once moved earth and heaven,but that which we are, we are : strong in will to strive, to seek , to find, and not to yield."

Patra also chaired the deposit insurance corporation(DICGC) and it was under his tenure that the maximum insurance was hiked from Rs 1 lakh to Rs 5 lakh. Also it was during his tenure that rules were changed to mandate that payments to borrowers of a failing bank be made in 90 days. This is a remarkable achievement Considering that earlier depositors of failed banks had to wait for years to get their insured amounts. Patra was also board member of RBI’s research subsidiary, CAFRAL and in that capacity he brought his research rigour to the work and publications off Cafral too.

Way beyond economics and central banking is Patra's love for wild life photography. And ever so often this writer's effort to reach him after the mandatory silent period post policy tended to be met with a whatsapp message that would say, " Sorry, I am in Tadoba" or Pench or Ranthambore. Profuse evidence of his love adorned his cabin and office desk.

Good bye Dr Patra. Hope you will now have more time to marvel at "tyger tyger, burning bright" or hear the " falcon's cries get fainter". And we fervently hope you will also continue to elate and educate us with your lyrical economics in some newer incarnations.