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India’s top central banker resigned on Monday after tussling for monthswith Prime Minister Narendra Modi’s government over its desire to exert morecontrol over the bank’s regulations and tap its reserves to increase governmentspending.
The departure of the banker, Urjit Patel, came almost a year before histerm was to end and sent India’s currency, the rupee, down nearly 2 percent.Concerns about a slowing economy and a sharp spike in oil prices had alreadycaused India’s stock market to give up most of its gains for the year.
「This will givea very bad signal to the Indian markets,」 said Sebastian Morris, a professor ofeconomics at the Indian Institute of Management in Ahmedabad. 「It establishesbeyond a doubt that Mr. Modi cannot get along with anyone with an independentmind.」
Officially, Mr. Patel said he was resigning for 「personal reasons.」 And Mr.Modi posted a message of praise for the economist on Twitter, saying, 「Dr.Urjit Patel is a thorough professional with impeccable integrity.」
But tensions between the Reserve Bank of India, which Mr. Patel led, andthe government had grown to the point that one of his deputies, Viral Acharya,gave a speech in October warning of the perils of too much governmentinterference.
「Governmentsthat do not respect central bank independence will sooner or later incur thewrath of financial markets, ignite economic fire and come to rue the day theyundermined an important regulatory institution,」 Mr. Acharya said then.
Mr. Modi’s government had threatened to invoke an obscure legal provisionto force the central bank to adopt certain policies. In particular, thegovernment sought to soften the central bank’s rules for new lending bystate-owned banks, which are struggling to manage their portfolios of previousbad loans.
Mr. Modi had also sought a transfer of some of the central bank’s $132billion in cash reserves to pump up government spending before elections nextMay, a measure the central bankers had resisted.
The central bank has been criticized for micromanaging the country’s banks,forcing them to hold more capital than required by international standards, andadopting tough new rules without consultation. Those rules include a recentorder that payments processors like Visa and MasterCard store all payment datainvolving Indians exclusively in India.
Mr. Modi’s Bharatiya Janata Party won an overwhelming victory in nationalelections in 2014, but it has struggled to maintain its popularity amid a rockyeconomic record.
Unhappy farmers recently marched on the capital in New Delhi and in Mumbai,the country’s financial center, to demand loan forgiveness and higher cropprices. Legions of small shopkeepers and manufacturers have complained aboutthe paperwork involved in one of Mr. Modi’s signature policies, the impositionof a national goods and services tax.
Mr. Modi’s other major economic policy, the sudden invalidation of papermoney in November 2016, has been roundly criticized by economists as causinggreat disruption to India’s cash-based economy without providing any realbenefits. Mr. Patel and the central bank were forced to manage the fallout ofthe move.
On Tuesday, election officials will tally the votes in legislativeelections in five states, providing an early indicator of Mr. Modi’sre-election prospects next year.
Mr. Patel, whose term wasto end next September, decided not to wait it out. 「Patelswallowed a lot of bitter pills,」 said Arun Kumar, an economics professor atthe Institute of Social Sciences near New Delhi. 「The pressure from thegovernment was increasing.」
——By Vindu Goel，US Business News
（The views expressed in this article are those of the author alone and not the Boao Forum For Asia.）
