The news of the resignation of Reserve Bank of India Governor Urjit Patel on Monday made it to the business sections of many prominent publications across the world. Patel’s resignation comes almost a year before his tenure was slated to end and days before a crucial RBI meeting on December 14 and many publications viewed it with caution and concern.
In a statement uploaded on the RBI’s website, Patel said that he was resigning “on account of personal reasons”. However, like publications in India, newspapers across the globe linked Patel’s resignation with the growing rift between the RBI and Narendra Modi’s government over the past few months.
The tussle between the Central bank and the Central government became public in October when RBI Deputy Governor Viral Acharya said: “Governments that do not respect central bank’s independence will sooner or later incur the wrath of financial markets, ignite economic fire and come to rue the day they undermined an important regulatory institution.” The RBI was not in favour of the Central government’s proposal to relax lending restrictions for banks or the government’s inter-ministerial committee’s proposal to set up an independent regulator for payment systems.
This tussle with the government was referenced in Vindu Goel’s report on Patel’s resignation for The New York Times which had the headline “India’s Top Central Banker Quits as Government Seeks More Control.”
The New York Times report quoted Sebastian Morris, a professor of economics at the Indian Institute of Management in Ahmedabad who said that Patel’s resignation provides a “very bad signal” to the Indian markets. Morris also told Goel that the resignation “establishes beyond a doubt that Mr. Modi cannot get along with anyone with an independent mind”.
The report charted the Narendra Modi government’s “rocky economic record”, citing farmers unrest and small manufacturers and shopkeepers’ complaints about the Goods and Services Tax. Patel and his team, Goel argued, was forced to deal with the consequences of demonetisation as well. He quoted Arun Kumar, an economics professor at the Institute of Social Sciences in Delhi, who said, “Patel swallowed a lot of bitter pills.”
The Wall Street Journal referred to the governmental pressure that Patel was reeling under but also called the resignation “a major surprise”. It quoted Madan Sabnavis, a chief economist at a Mumbai Care Ratings firm who recalled the last board meeting at the RBI where “all the issues seemed to have been sorted out”. It also quoted stock broker Deven Choksey who said: “Had he [Patel] put the country first before the autonomy of RBI, the situation could have been averted.”
The report ended with the possible implications of Patel’s resignation on India’s investment prospects. Investors are going to see Patel’s exit as “negative sign”, Mark Williams, the chief Asia economist at Capital Economics, told the publication. “He is the second successive RBI governor to leave after coming under pressure from the government,” he said.
The Washington Post and The Daily Mail from The United Kingdom carried news reports by the Associated Press with the headline “Head of India’s central bank resigns amid government split” and “India central bank chief quits after spat with government” respectively. Both reports took a cursory glance on the rift between the central bank and the government.
A more detailed take on Patel’s resignation was offered by The Economist, which declared that “India’s economic policy is in turmoil after its central bank boss steps down”. The publication likened the rift between the bank and the government to one “taken from an economics textbook”. The government, with the general elections next year, would like the RBI to relax its monetary policy causing a “short, politically convenient economic boom”, which the RBI “understandably” does not support, the publication explained.
Discussing the resignations of the previous governor of RBI Raghuram Rajan and government’s chief economic advisor Arvind Subramanian, the report goes on to focus on what the resignation means for Indian politics. “On coming to power in 2014, the prime minister Narendra Modi, and his party the Bharatiya Janata Party (BJP), offered a combination of liberal market economics and cultural populism,” the Economist explained. “But as elections near, the first part of that has broken down.”