In quick succession, two top economists in India have vacated their posts.
A day after the Reserve Bank of India (RBI) governor Urjit Patel created a flutter in India’s financial circles by announcing his resignation, another top economist, Surjit Bhalla, also said that he has stepped down. Bhalla was a part-time member of the Prime Minister’s Economic Advisory Council (PMEAC)—an independent body that advises the government, and specifically the prime minister, on important economic issues.
Bhalla took to Twitter, on Dec. 11, to announce his resignation which has been accepted by the government. His decision is on account of certain personal commitments, he explained in his tweets.
The economist was a staunch supporter of prime minister Narendra Modi’s demonetisation exercise and had fiercely defended the government, even when it came under fire from other experts. In practice, members of the PMEAC almost always back the government when it faces criticism. On Dec. 10, Ashima Goyal, another member of the team, had said that Patel’s resignation may be for the better.
Bhalla’s and Patel’s resignations are only the latest in a string of departures of high-profile economists under the Modi-led government. Patel had announced he was stepping down for “personal reasons,” nine months ahead of his tenure coming to an end. This caps months of simmering tensions between the government and the central bank over the latter’s autonomy. While the issues were believed to have been defused on Nov. 19, they clearly weren’t.
Patel’s exit is being perceived as a sign of the gravity of the situation in India, with experts, including his predecessor Raghuram Rajan, warning that this is “something that all Indians should be concerned about.” Rajan left his position in September 2016 after clashing with the Modi government on several issues, becoming the first RBI governor in 20 years to have not been offered a second three-year term.
Here’s a list of the economists and financial experts who left their positions under the Modi government.
India’s “rockstar” central banker served at the helm of the RBI for three years between 2013 and 2016, and during his tenure, he locked horns with the Modi government on more than one occasion. Besides conflicting opinions over what to do about interest rates, Rajan’s determination to tell it like it is, and warnings of the threat of “strong governments,” drew heavy criticism. This is believed to have played a role in keeping him out of a second term.
Since his return to academia, Rajan has continued to emphasise in interviews that “the sensible government knows when to back off.”
In August 2017, Panagariya stepped down from his position as the first vice-chairman of the Niti Aayog, the think tank set up in 2015 by the Modi government to replace India’s planning commission. The veteran economist and Columbia University professor had been hand-picked to take up the role, but his return to academia after two-and-a-half years at the Niti Aayog was a big loss, coming close to a year after Rajan’s exit.
At the time, Panagariya maintained there had been no conflict between him and the government. But earlier this year, writing in The Economic Times newspaper, he warned that the Modi government’s latest economic plans could undo decades of progress.
In June this year, chief economic advisor (CEA) Subramanian, citing family commitments, abruptly announced that he would step down from the position he had held since October 2014. The star economist was best known for transforming India’s annual economic survey into a comprehensive but approachable document that covered the risks of climate change, as well as India’s missing women, besides the expected economic concerns.
Subramanian returned to academia in the US and, in November, released a book about his experience working as India’s CEA. In it, he described Modi’s controversial demonetisation move of 2016 as a massive and draconian monetary shock.
India’s most recent central bank governor took over at the end of Rajan’s term in September 2016. He inherited an economy battling a growing bad loans crisis, and much of the conflict between the RBI and the Indian government has had to do with the former’s stringent rules to address this issue.
In October, tensions reached an all-time high, with the RBI’s deputy governor Viral Acharya warning in a speech that “governments that do not respect the central bank’s 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.” At the time, it was widely believed that Patel was on the verge of resigning, though a nine-hour meeting between the RBI and the government in November appeared to ease the tensions.
But now it’s clear that the truce didn’t last for long.