RBI’s issues go Viral! Deputy Governor’s exit strengthens view that govt uneasy with dissent

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Published: June 26, 2019 1:47:06 AM

It is true that most expected Deputy Governor Viral Acharya to quit when Patel did.

Viral Acharya, rbi, reserve bank of indiaViral Acharya

Various Indian governments have had, from time to time, top economists who have been educated abroad—indeed, many of Dr Manmohan Singh’s team when he was finance minister were educated abroad—but thanks to an unseemly controversy over the past few years, the Narendra Modi-government gave the impression that videshi-bhagao was high on its agenda. So, before RBI Governor Raghuram Rajan decided not to seek an extension, there was talk of how he was “mentally not fully Indian” and, later, when Arvind Panagariya left NITI Aayog, there was talk of how, under Modi, the foreign influence on policy-making was reducing. If it wasn’t bad enough that this made the government look xenophobic, the government constantly, and publicly, attacked Urjit Patel when he was RBI Governor, appointed a well-known critic to the central bank’s board, tried to ensure a part of RBI’s reserves were handed over to it and even tried to alter the governance structure of RBI to reduce the Governor’s powers; indeed, the tussle over RBI’s reserves is still carrying on and, if news reports are to be believed, the finance secretary is going to write a dissent note in the Bimal Jalan committee’s report on this.

It is true that most expected Deputy Governor Viral Acharya to quit when Patel did, since it was he that delivered the speech talking of how, in Argentina, the bond market taught the government a lesson when it fired the central bank’s chief and then transferred a third of its ‘excess reserves’ to itself; to many, it appeared he was asking Indian bond markets to do something similar since the government here too was looking to sequester a part of RBI’s reserves. But when Acharya stayed on after Patel resigned, it appeared as if the new Governor Shaktikanta Das had managed to convince him that the government bore no ill will towards him; the fact that Acharya has now tendered his resignation before his term came to an end, however, suggests the peace was just temporary. As it happened, over the past few months, Acharya has been more hawkish about inflation than others on the monetary policy committee including the Governor. This is not to say that Acharya’s view is right—indeed, FE has been critical of RBI for not lowering repo rates aggressively in the face of a benign inflation outlook—but his quitting strengthens the view, rightly or wrongly, of the government being uncomfortable with dissent. This is unfortunate and should be a lesson to the government in how to handle criticism; certainly its officials and those associated with it should refrain from berating those with a different point of view.

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