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Outspoken RBI deputy governor Viral Acharya resigns

Principal economic advisor Sanjeev Sanyal, RBI executive director Michael Patra contenders for the post

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Viral Acharya
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Viral Acharya, deputy governor, Reserve Bank of India (RBI) and a strong proponent of the independence of the central bank, resigned from his post six months before the end of his term. RBI in a release confirmed that he resigned.

"A few weeks ago Viral Acharya submitted a letter to the RBI informing that due to unavoidable personal circumstances, he is unable to continue his term as a Deputy Governor of the RBI beyond July 23, 2019. Consequential action arising from his letter is under consideration of the Competent Authority," RBI said. He will be the fourth economist after Arvind Panagariya, Arvind Subramanian, Urjit Patel to leave before completing the term, in the last few years.

Sanjeev Sanyal, principal economic advisor in the Ministry of Finance, and Michael Patra, executive director, RBI and member of the Monetary Policy Committee (MPC) are the two possible contenders, according to sources.

In October last year, Viral Acharya had said in a public function that "government that invest in central bank independence will enjoy lower costs of borrowing, the love of international investors, and longer life spans". "Governments that do not respect the central bank's independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution," Acharya said.

In the same speech, Acharya also compared the priorities of RBI and those of the government to cricket. "Horizon of decision-making is short, like a T20 match". The RBI, on the other hand, "plays a test match", he had said.

There was friction between RBI and the government over the transfer of the central bank's excess capital reserves to the government. The 45-year-old Acharya, an alumnus from IIT- Bombay, was teaching in the Stern School of Business at New York University. An RD Burman fan, Acharya has also composed music, having released an album of romantic Hindi songs.

His love for literature was also evident from the MPC minutes released last week, where Acharya was seen quoting from Ernest Hemmingway's Old Man and the Sea. Acharya said he is preparing and writing the minutes early so that he can have one longer drafting day just like Santiago, the old man in Hemmingway's epic novel.

"Why do old men wake so early? Is it to have one longer day?" wonders Santiago, the old fisherman, in 'Old Man and the Sea'. "I found myself preparing and writing these minutes early too, perhaps so I could have one longer drafting day!," Acharya said.

He said he is in a dilemma on which way to vote. "How should I vote? I found that I was speaking to myself as Santiago, the old fisherman". Acharya wrote, "It is better to be lucky. But I would rather be exact. Then when luck comes, you are ready." The deputy governor voted for a cut in the policy rate.

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