Former finance secretary and a crucial person behind Modi government’s demonetisation and GST exercise Shaktikanta Das replaced Urjit Patel as RBI governor on December 11. His appointment came 24 hours after Urjit Patel submitted his resignation amidst growing tension between the centre and the central bank. While Patel stepped down from his post citing personal reasons, experts believe that his resignation is more than what met the eyes. Patel is the first governor since 1990 to resign before completing the term. Patel’s term was slated to end in September 2019.
Sixty one-year-old Das has been Modi government’s key person since June 2014 when he took charge as Union revenue secretary. Since then, he has served in various capacities in the Finance Ministry and retired as Secretary of the Department of Economic Affairs in 2017. He was actively involved in the planning and execution of Modi government’s demonetisation move. Not only he acted as government’s spokesperson on demonetisation move, he also suggested a controversial proposal of putting indelible ink on the index fingers of people to prevent them from exchanging old currency notes beyond specified limits. As a revenue secretary and someone who’s always been in PM Modi’s good books, Das was instrumental in pushing the GST rollout.
With the ongoing tussle between the RBI and Modi government, Das at the helm of the central bank it might easier for the government to impose its decisions.
Urjit Patel’s resignation on December 10 comes just a few days before RBI’s meeting with the government on December 14. The scheduled meeting was expected to be a face-off between the two parties that have been launching attacks at each other over government’s increasing control over the functioning of the central bank. The rift between the two has been very apparent since February 12 when the government circular sought mandatory insolvency proceedings for the debt servicing default beyond 180 days. Besides this, Centre and RBI have had serious confrontations on multiple prickly issues like transfer of surplus RBI reserves, debt restructuring of MSMEs, lower interest rates, among many others. The RBI has time and again asserted that the central bank cannot be forced to implement the government’s populist schemes and that it’s best not to attack institution’s autonomy.
In October 2018, deputy governor Viral Acharya resigned from his post over the proposal to transfer RBI reserves to the government. Citing examples of countries like Argentina, Acharya cautioned, “Undermining the regulator’s independence could be catastrophic.”