Will the RBI go from autonomy to supine?

The Governor of the Reserve Bank of India (RBI) Urjit Patel resigned a couple of days apparently for "personal reasons". It was his "privilege and honour" to serve in the RBI, he said, and thanked his colleagues for their "support and hard work". Pointedly he did not thank the Prime Minister, who appointed him as governor, or the Finance Minister with whom he must have interacted regularly in carrying out his duties. Patel took a strict view of bad loans at banks, he refused any instructions on monetary policy and refused to hand over at least Rs 3.6 trillion, over one-third, from RBI's contingency reserves. Bankers and finance companies are cheering Patel's exit as they hope to go back to old ways of evergreening and hiding bad loans from becoming public. Patel's predecessor Prof Raghuram Rajan started the process of cleaning up public sector banks for which he was treated so discourteously by the government that he quietly left India. Patel had a rough time at the RBI, starting with demonetisation of 86% of all currencies in circulation in India which was thought to be a bad idea by Rajan. There were questions about why Patel did not voice his doubts about the exercise but one man who was intimately involved in the planning was the Economic Affairs Secretary Shaktikanta Das. A retired IAS officer, Das has been quickly appointed the new Governor maybe because he can be relied upon to help the government. The last civil servant to be appointed Governor of the RBI was Duvvuri Subbarao who was highly qualified. He was appointed in 2008 when average consumer price inflation was over 8% but progressively reduced interest rate from a high of 9% in July 2008 to a low of 4.75% in April 2009. Congress won re-election in May and average inflation rose to over 12% in 2010. Subbarao slowly raised rate to 8% in 2012 but lowered it to 7.25% in 2013 even as inflation rose to nearly 11%. Congress was trounced in the 2014 elections, managing to win only 44 seats, not enough to nominate anyone for the post of Leader of the Opposition. What are the problems confronting Prime Minister Modi? His party, the BJP lost in assembly elections in 3 Hindi states of Madhya Pradesh, Rajasthan and Chhattisgarh. Hindi states have high population with high fertility rates so they have larger representation in the parliament. To win these states Modi has to alleviate genuine suffering of farmers. However, indirect tax collections from the Goods and Services Tax will be short by Rs 1 trillion. Having once looted the people through demonetisation Das is eminently suited to looting the RBI of its reserves. With its power to print money can the RBI go broke? We will know soon.