The Reserve Bank of India headquarters in Mumbai. Photo: AFP / Indranil Mukherjee

Former Reserve Bank of India deputy governor Viral Acharya said his exit was a “form of dissent” in the wake of worsening ties between the government and the central bank. He quit in July 2019, six months before his term was scheduled to end.

In an interview with the Indian Express newspaper, he said, “We should not interpret exits as a problem. In my view, we should interpret exits as a form of voice, as a form of dissent that the system requires to have the right public debates and get to the right path… In my view, the government and the bureaucracy are stuck in the old mode of functioning even though the Indian economy is no longer the nationalized era economy. They are regressing… they need to embrace a more market-based economy….”

According to Acharya, the conflict between the government and the central bank arose because of the former’s push for opening liquidity, disregarding long-term goals.

When asked whether the central bank officers could have acted with more tact and avoided this situation, he responded that central bankers who worked “tactfully” with the government did not produce better outcomes. He said, “…to everyone who says we do not know how to work tactfully, we do not know how to communicate, we did not build allies, we did not bring everyone on board, my question is when things were being done in that manner, do you have evidence to show me that the next 10 years of India’s growth have been great?”

The former central bank official said, “We have not had an open debate about the fiscal situation of the country. A number gets announced as the real deficit and everyone is happy… everyone in the system says, “Oh, how can we question the real official statistics of the government?”. But when they are not right, they are not right. I want to fundamentally disagree with the thesis that those who agree have been able to pave a better outcome for the country.”

Acharya joined the RBI as a deputy governor in January 2017, while Urjit Patel was the governor, and was in charge of monetary policy, which decides on interest rates, among other functions. At the age of 42, he became the youngest deputy governor and was supposed to serve a three-year term.

Before joining the RBI, Acharya was the CV Starr Professor of Economics at New York University’s Stern School of Business, and he rejoined after quitting the central bank.

Acharya sparked controversy in October 2018 when he made a powerful speech at a function lamenting that Prime Minister Narendra Modi’s government was not respecting the central bank’s independence and warned of disastrous consequences.

Using a cricket analogy, he compared the government’s economic policies to a T20 match (a short format of the game lasting a few hours), in contrast to the long-term planning of a central bank, which he called a Test match (which lasts five days). This ruffled many feathers in the government. Barely two months after this speech, his boss Urjit Patel resigned as central bank governor in December, 2018, without completing his term.