RBI Governor Urjit Patel’s unprecedented and unexpected resignation comes as a massive blow to India’s monetary and banking system. It reflects a deep sense of concern and put a huge question mark over RBI’s autonomy. Patel may have cited personal reasons while calling it a day, but the grounds for signing off are clear as daylight. The abrupt development will throw sharp questions. Has Patel made a bold statement or has he submitted meekly to government pressure? What happens to the credibility of this institution post Patel?
That Patel was facing severe pressure from the government on a host of issues was an open secret. The contentious issues which remained unresolved included liquidity, credit flow, controls governing weaker banks, capital structure of RBI and role of RBI board. The RBI governor had three options, either to accede to the demands of the government, fight the government till Article 7 is invoked or resign. And Patel preferred the third option. The writing is on the wall. His resignation will hit the heart of autonomous institutions of the county.
RBI governors quitting is nothing new, neither are the RBI-government differences. Patel is the 5th governor to quit office. Irreconcilable differences, constant frictions and complete breakdown of communication are hallmarks of such a divorce. It is here when the government instead of playing a moderator, assumes the role of a confronter.
Patel’s resignation is purely an act of dissent and a statement of silent protest. It only meant that he is not ready to bow down to pressure. While his resignation will force introspection, it would have made better sense if he took this battle forward and fought it out, even if it meant having the sword of Damocles in the form of Article 7 hanging over his head. This is not a personal issue. It’s about India’s macro-economics and a serious matter concerning the entire country. There is undoubtedly a strong underlying message to this resignation, but quitting with an uncomfortable silence will not help undo a wrong.
Prime Minister Narendra Modi’s praise of Patel calling him an economist of very high calibre with a deep and insightful understanding of macro-economic issues is an attempt to mask the discord. The resignation, on the contrary, will help the government move ahead with its agenda. It will clear the way for Modi and his team to set a favourable template. What remains to be seen is: how the government involves with the body hereon, the politicization of the board and how far RBI manages to preserve its autonomy.
