Viral Acharya, the deputy governor of the RBI, has resigned
months before his term was to end. Acharya was instrumental in bringing to
public notice the feud between the government and the RBI over transferring the surplus with
the RBI to the government, more credit flow to small units through easing of
norms, easing of curbs on public sector banks and funding support to the NBFC
sector. It was his fiery speech that had informed the public how the
government was putting pressure on the RBI to take certain decisions which the
apex bank was not willing to. It also showed how the independence of the RBI
was being undermined.
Acharya
had supported the then Governor Urijit Patel. But when he did not resign along
with Patel, it was thought that he would continue till the end of his term. But
in recent months, Achayra has differed with the Shaktikanta Das on issues like
inflation and the reduction of repo rates in the monetary policy reviews. Since
Acharya felt that the bank was toeing the government line and was being too
accommodative, he put in his papers. He is expected to return to his teaching job
in the US.
The
RBI is an independent institution which is expected to take policy decisions on
its reading of the economy and the fiscal policies being followed by the
government. If the government puts pressure on the regulator and forces it to
toe a particular line, the very purpose of having it is defeated. All the
functions of the RBI can then be assigned to officials in the finance ministry.
Having said that, it should also be highlighted that more than 80 percent of
the economists polled before successive monetary policy meets in the last six
months had said that the apex bank should reduce rates as inflation was in
check and growth was not happening. Hence, Acharyaâs immediate trigger for
resigning is not valid.
But Acharya did something very important. His speech was instrumental in preventing the transfer of the RBI surplus to the government account, which in turn prevented profligacy by the government ahead of the general elections. RBI surplus is not meant to be used in a cavalier manner. It is the cushion that helps the RBI deal with extraordinary situations in the monetary market and in times of severe economic depression. Acharya will be remembered for preventing the political use of an economic asset.
