Urjit Patel vs BJP: Where Will the Government Go Looking for an Obedient RBI Governor Now?

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Urjit Patel vs BJP: Where Will the Government Go Looking for an Obedient RBI Governor Now?

Illustration: Shruti Yatam

Say what you will about the world we live in, but things are rarely boring. Just last week we were complimenting the RBI governor for “tugging a Patel” and slugging it out by holding his own against the government. Now we find ourselves deciphering his departure like a failed contestant on The Bachelor.

Urjit Patel resigned from his post as RBI governor citing that old nugget: “personal reasons”. This has as much veracity as the time Shruti Haasan used “removal of a deviated septum” as a euphemism for her nose job. It doesn’t require a keen student of current affairs to realise that “personal reasons” is just code for “just generally fed up of all this nonsense”.

We’re not holding Patel to his statement. Given the sticky state of affairs, it was probably prudent of him to keep his reason vague rather than use it as a platform to rain criticisms on the government. If Raghuram Rajan taught us anything, it was that it’s safer to first physically remove yourself from the country before voicing your true opinion.

The real question is: What now, brown cow? (which is a statement we’ve all been waiting for an opportunity to use since the beef ban began).

Considering our government has managed to wear down not one, but two distinguished central bankers into submission, it seems clear they’re on a path to victory. It is no mystery that the BJP (and the UPA before it) pines for a central bank with all the autonomy of a two-year-old with food allergies. Ironically, so much power in the hands of a body seeking any levers it can pull for re-election also has alarming similarities to a two-year old with food allergies. Just think about all that our government can do with complete control over the RBI reserves. Now think about a funny cat video you saw, so you can calm yourself down a bit before we get started.

If Raghuram Rajan taught us anything, it was that it’s safer to first physically remove yourself from the country before voicing your true opinion.

For starters – there’s the big one. Liquidity. The excess funds that the government believes the RBI has will almost certainly be injected into the economy to boost short- term growth. What’s wrong with growth, you might ask. Nothing per se is wrong with growth, but if the government’s thoroughly vetted, scientifically accurate, and retroactively tweaked GDP numbers are anything to go by, our economy is doing fine. Pumping in more money at this time is purely a steroid shot in the arm of an economy that needs to look extra butch come 2019. The problem is that spending money for the sake of spending it has usually not worked out so well in the long run. Companies do dumb things when they have easy access to capital. Just ask Air India… or PNB… or oh, I don’t know, maybe just send a blanket email to eight out of 10 PSUs and I’m sure they’ll all respond once their BSNL connections start working again.

Then there’s interest rates. The government may not want to fiddle with these in the short term, owing to the fact that the rupee is holding on for dear life and there’s still uncertainty on oil prices. Although, if I was up for re-election, I would probably reduce interest rates to boost the economy further and burn through India’s foreign reserves to prop up the value of the rupee. But that’s just me. I’m sure our government doesn’t want to stay in power that badly. Forget I even said it. (#TheseAreNotTheDroidsYouAreLookingFor)

And finally – regulation. Consider, for the sake of argument, that the RBI has been fairly strict in the way that commercial banks have functioned. This, I’ll admit, is a bit of a stretch when we think about epic financial fails like PNB and Yes Bank. But if you accept that it is in the best interest for short-term growth if RBI norms were only further relaxed, well then, we’re in cat video territory once more. Seriously, go watch that video again while every loan and credit card you ever applied for is getting expedited approval.

Pumping in more money at this time is purely a steroid shot in the arm of an economy that needs to look extra butch come 2019.

Of course, none of the above needs to come to fruition if the next RBI governor sticks to his guns. Don’t forget that Patel was supposed to be easier to handle that his predecessor but did remarkably well to fight for autonomy. We don’t quite know who’s coming next, but is anyone else worried that Patel’s resignation has played out so seamlessly with Vijay Mallya’s extradition? Coincidence? Probably, but there’s no reason we should be surprised if someone equally incompetent is pushed into the role of RBI governor.

At this point, only two things are clear. Whoever succeeds Patel needs to accept that fighting for autonomy will almost certainly mean an incomplete term. A few of the names that have popped up – Subir Gokarn, executive director, IMF; Rajiv Kumar, secretary, financial services – do seem genuinely like they would keep the fight going. However, the government might be more careful this time in choosing someone they can influence more easily. Who knows, maybe a statue of Raghuram Rajan (with chiselled abs to boot) is what the government has been working toward all along.

But the more worrying thing is, that the last time the RBI governor quit, demonetisation followed. Re-load the cat video as you ponder what exactly the government might have planned to have pushed Patel off the edge.

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