Narendra Modi, the Indian prime minister, took two big blows in less than 24 hours. Investors should worry less about the bruises, and more about what he might do to recover from them before next year\u2019s general elections. The first knock came on Monday evening when besieged Reserve Bank of India governor Urjit Patel abruptly resigned. Although he cited personal reasons, nobody is in any doubt that it was New Delhi\u2019s incessant harassment that led to the monetary chief\u2019s early exit. Team Modi, it appears, is out to reshape the RBI, ultimately leaving it with an emaciated balance sheet, little power of supervision over banking and finance firms, and under the thumb of a bunch of bureaucrats. Why an 83-year-old institution needed such a remaking now became clear in the second punch. Votes counted on Tuesday handed defeats to the ruling party in three key state elections. The fact that Modi\u2019s personal popularity is struggling to pull votes puts a big question mark around the outcome of next year\u2019s parliamentary polls. How does Modi make it right with voters in six months? How does a government that has little fiscal firepower deal with agrarian distress and dismal growth in urban jobs? By getting a credit boom going, of course. With the blessing of a pliant central bank. That\u2019s where the whack of Patel\u2019s departure is related to the thwack Modi got from voters. What the prime minister might do in response could please speculators, but long-term investors should be nervous. Stimulating the economy is fine, but who\u2019ll lead the charge? Large corporate balance sheets in India are still under repair. And among the 21 state-run banks, which have the lion\u2019s share of cheap deposits, as many as 11 are facing various degrees of lending restraints as a punishment by the RBI for their prior recklessness. What Modi needs now is a central bank that will shield errant corporate debtors from bankruptcy, and unshackle the undercapitalized state-run banks, so they can get together and start a new credit party. Better still, the lenders could be recapitalized by raiding the RBI\u2019s balance sheet to help unleash their animal spirits. That, after all, was also a bone of contention between Patel and New Delhi, which believes the central bank has something like $50 billion of excess capital sitting idle on its balance sheet. Indian markets\u2019 behavior on Tuesday showed how traders are viewing Patel\u2019s exit as a get-out-of-jail-free card. An index of state-run lenders jumped 2.65 percent. Yes Bank Ltd., a private-sector lender which has repeatedly misreported its bad loans to the regulator, and whose co-founder, Rana Kapoor, has been asked by the RBI to leave as CEO by next month, surged more than 7 percent. But it\u2019s the non-bank shadow lenders that will do the heavy lifting. With the liquidity crunch brought on by the bankruptcy of infrastructure lender IL&FS Group easing, bank lending to these finance companies is expanding again, and they\u2019re likely to rev up everything from truck-financing to subprime mortgages. Capital isn\u2019t a problem. After all, it\u2019s not uncommon for the equity in shadow finance companies\u2019 operating companies to be funded via bonds issued by their unlisted holding companies, which are lapped up by Indian mutual funds. The RBI has so far been too caught up with banks to look closely under the hoods of these shadow lenders. Now, with a pro-growth government dictating the regulator\u2019s agenda, limits on leverage could be relaxed even further. Desperate populism doesn\u2019t always need the state\u2019s resources \u2013 as long as taxpayers are on the hook to socialize private losses later. Things don\u2019t have to be so bleak, but the twin blows to Modi have surely raised the risk. Exhibit A: the appointment, after the election results, of Shaktikanta Das, the former finance-ministry bureaucrat who had executed Modi\u2019s draconian currency ban in late 2016, as the next RBI chief. Modi would have known that if Patel\u2019s leaving had done damage to the perception of the RBI\u2019s independence, the naming of Das would do nothing to reverse it. But central-bank autonomy doesn\u2019t win votes. A market-pleasing credit binge just might do the trick.