What might they have been thinking at the central banks of Canada, the United Kingdom and the United States on December 10 when they received word of Reserve Bank of India (RBI) Governor Urjit Patel’s resignation?
The abrupt departure marked the end of a power struggle between the RBI and its political masters; for two years, India’s central bankers and government have been at odds over the regulation of banks. In 2016, Prime Minister Narendra Modi’s government ran former RBI Governor Raghuram Rajan out of town and replaced him with Patel. The result: within only a few years of adopting a formal inflation target, the RBI has been robbed of the operational independence it needs to fulfill its mandate. There is little reason to think that Shaktikanta Das, the new governor, will have the autonomy to make unpopular decisions when the time comes.
Patel’s fate must resonate with his former counterparts at other big central banks. The leaders of the Bank of Canada, the Bank of England and the United States Federal Reserve (Fed) all experienced political turbulence of their own in 2018. In each case, it seemed as if the central banker’s only offence was forgetting who appointed him.
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