Update 11:57 am: Viral Acharya confirmed his departure from the RBI six months before his term ends ‘due to unavoidable personal reasons’, in an email to MediaNama. His last day at the RBI will be on July 23, 2019. He expects to be at New York University’s Stern School of Business in Fall 2019.
The RBI’s deputy governor Viral Acharya has resigned six months before the scheduled end of his term, Business Standard reported (paywall). He had joined the central bank on January 23, 2017, for a three-year term, and was the RBI’s youngest deputy governor post-economic liberalisation. Acharya had resigned a few weeks before the last meeting of the RBI’s monetary policy committee earlier this month, per the report. MediaNama has reached out to the RBI for confirmation.
Acharya’s last day in office will reportedly be a few days before the end of July. He will resume his position as the C.V. Starr Professor of Economics at the New York University’s Stern School of Business in August 2019, instead of the scheduled February 2020.
Potential successors? The senior most deputy governor, N.S. Vishwanathan, whose term is scheduled to end in the first week of July, is likely to stay back. Although it is not clear who Acharya’s successor would be, Sanjeev Sanyal, principal economic advisor in the Ministry of Finance, and Michael Patra, the executive director of the RBI and a member of the MPC, are two names doing the rounds. Under the RBI Act, RBI can have up to four deputy governors, one of whom is typically a commercial banker and another an economist, the report pointed out.
RBI v Central Government: A worsening conflict?
Since Shaktikanta Das’s appointment as the RBI governor, the RBI has reversed its tight monetary policy stance, according to NDTV, Acharya had reportedly differed from the Das in the last two monetary policy meetings on growth and inflation. In the last such meeting, Das and Acharya had ‘differed strongly’ on the state of the fiscal debt and how to account for that. ET reported that Das had said that ‘it was unfair to club the borrowings of state-run enterprises into the state of fiscal deficit’. Acharya, on the other hand, had said that the borrowing requirement of PSUs matter to the overall deficit.
According to an Economic Times report, Acharya had been uncomfortable since Urjit Patel resigned as the governor on December 10, 2018, citing personal reasons. Patel had resigned amidst increasing tensions between the central bank and the finance ministry, according to the multiple reports.
Both Acharya and Patel have argued in favour of preserving RBI’s autonomy. In a speech that Acharya gave on October 26, 2018, Acharya had warned of the ‘potentially catastrophic’ consequences of interference on the government’s part that include ‘wrath of financial markets’ if the autonomy of a central bank was compromised, per multiple reports. ‘Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite (an) economic fire, and come to rue the day they undermined an important regulatory institution,’ Acharya reportedly had the backing of the then RBI Governor Patel for making the speech.
***Updated at 11:57 am with a response from Viral Acharya. The original article was published at 11:15 am.