Acharya resignation: We'll pay the price for Yes-men

Last Updated: Mon, Jul 01, 2019 11:20 hrs
Viral Acharya

It has happened too often to be a surprise, and no one who remembers the headlines from October last year could claim they weren’t expecting something of this sort.

But the exit of Reserve Bank of India Deputy Governor Viral Acharya, who was really the only economist in the central bank’s senior-most ranks, marks the departure of yet another expert who was unafraid to speak his mind.

First, there were the bizarre circumstances of Raghuram Rajan’s departure.

His successor Urijit Patel resigned in December 2018, over differences with government-appointed directors.

Other economists who resigned from key positions before their terms ended were Arvind Panagariya who quit as NITI Aayog Vice-Chairman in 2017 and Arvind Subramanian, former Chief Economic Advisor to the Indian government, who recently published a research paper that estimates that the Indian government exaggerated its gross domestic product growth between 2011-12 and 2016-17. He suggested that the figure was likely to be between 3.5% and 5.5%, against the government’s claim of 7%.

Governments have rarely had space for dissenters. When they feel it will be bad publicity to fire them, they choke them.

On October 26, 2018, Acharya delivered an address titled “On the Importance of Independent Regulatory Institutions – The Case of the Central Bank” as the A. D. Shroff Memorial Lecture in Bombay.

His speech, which came at a time when the economists in the RBI and the government- appointed directors were failing to resolve their differences of opinion on key issues ranging from the extent of the bank’s reserves to the relaxation of the Restrictive Prompt Corrective Action (PCA) framework for weak banks, repurchase agreements, and loans for small businesses, hit the headlines the next day, not least because he thanked Urijit Patel for suggesting the theme.

The speech is essentially a roadmap, with examples from other eras and other countries, of what happens when a government decides to impinge on the independence of its monetary authorities – the effect it would have on the financial markets, on foreign investment, and eventually on the country’s economic health. Acharya outlined all the ways in which the government is failing to give the RBI its independence.

Within two months of his speech, Patel had left, and six months after, Acharya follows.

The RBI is currently helmed by Shaktikanta Das, a retired bureaucrat and a historian by training.

India has already made some extremely foolish economic decisions, sanctioning expensive projects which serve little purpose. It is likely that, with so many crucial states having their assembly elections in the coming year, the annual budget will contain sops for various vote banks.

One presumes the money will come from the same deep pockets that funded a Rs. 3000-crore statue and a Rs. 110,000-crore bullet train project and a gigantic display of the prime minister’s face on Times Square and six years’ worth of globetrotting. Except those pockets have got less deep, and would like to borrow from other pockets – the central bank’s. Governments have traditionally disliked officials who stand up for their beliefs.

Raghuram Rajan’s criticisms of demonetisation after his resignation make his opinions on the matter when he was in the know quite clear.

When a government entirely disregards its advisors and installs yes-men instead so that its politicians can have their way, it does not bode well for the country.

None of the economists who quit their positions has explained his reasons for doing so, except to cite “unavoidable personal circumstances”, as Acharya too has done.

However, his speech was prescient, in speaking of the resignation of Argentina’s central bank chief Martin Redrado, around the time the Argentine government was aggressively attempting to engineer the transfer of the bank’s reserves to the national treasury, a move which would eventually cause much chaos in the country’s economic health.

Acharya spoke of how governments undermining central banks’ independence would be akin to scoring a self-goal.

Both the Congress and the BJP governments have had little patience for dissent, and have rewarded those who toed the line of the powers-that-be.

The systemic problem in India, this allergy to dissent, starts early, in our schools and colleges, where independent thinking is actively discouraged; in the scoring sheets for our examinations, in which one is expected to reproduce textbook answers; in the question patterns in our civil services examinations, where the emphasis is far more on general knowledge of what has happened in the past than on one’s vision of what should be done in future.

And so, here we are, with trolls from the Right and trolls from the Left, demanding agreement and submission.

Perhaps while the watchmen pat themselves on the back for imagined growth and the liberals pat themselves on the back for liking each other’s tweets, we might pause a moment to be genuinely afraid of a future without dissent.

More Columns by Nandini Krishnan:

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How Modi-haters became his PR angels

Why the Indian elections will always go wrong

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The legislative dangers of election year

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The G.O.A.T vote: When opinion offends

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Why the Ambanis should rule India

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Nandini is the author of Invisible Men: Inside India's Transmasculine Networks (2018) and Hitched: The Modern Woman and Arranged Marriage (2013). She tweets @k_nandini. Her website is: