Economy

Viral Acharya unable to continue as deputy governor beyond July 23: RBI

Viral Acharya unable to continue as deputy governor beyond July 23: RBI

Speculation about Acharya's exit had started on the day of his boss's resignation, forcing the RBI to deny it then. RBI in its statement said Viral Acharya is leaving the post due to "unavoidable personal reasons".

"Correct economic measurement of the fiscal slippage should factor in the implications of a rising PSBR (Public Sector Borrowing Requirement) rather than rely exclusively on the consolidated fiscal deficit figures, the former Deputy Governor had said".

Last year, the country witnessed a long-simmering discord between the central bank and the government when reports stated that the Centre had invoked never-before-used powers under Section 7 of the RBI Act allowing it to issue directions to the central bank governor on matters of public interest.

"Governments that do not respect central banks' independence will sooner or later incur the wrath of financial markets, ignite economic fires, and come to rue the day they undermined an important regulatory institution; their wiser counterparts who invest in central bank independence will enjoy lower costs of borrowing, the love of worldwide investors, and longer life spans", he had said in the October 2018 speech delivered in Mumbai.

During his term, Acharya on several occassions have been critical of government's decision making. Acharya's resignation has been talked about as a possibility since governor Urjit Patel's sudden departure in early December.

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Acharya emphasised that undermining a central bank's independence is akin to committing a "self-goal" for any government.

Acharya and Chetan Ghate, though, were the only members who cautioned about the risks of higher inflation if there was a higher budget deficit and a sustained rise in food prices, as an uncertain monsoon and volatile global crude oil prices threaten. "Over the near term, that probably seals the deal on another rate cut in August, while further cuts beyond this are a growing possibility", Shilan Shah, senior India economist at Capital Economics, said in a note.

Those expectations are however set to change following the change in the central bank's stance to accommodative earlier in June.

Acharya was roped in by the government as Deputy Governor of RBI on 2017, January. This is apart from the non-official directors nominated by the central government.


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