MUMBAI: India’s rupee plunged on Tuesday after the country’s central bank chief quit following a dispute with the government that analysts say raises fears about its independence.
Urjit Patel resigned as governor of the Reserve Bank of India (RBI) on Monday evening following months of tensions with Prime Minister Narendra Modi’s government over interference in policy.
Patel cited “personal reasons” for his decision but experts and media reports have said he was annoyed by New Delhi’s repeated efforts to impose its influence.
The rupee sank more than 1% against the dollar, with speculation swirling that an RBI intervention kept it from falling further.
Indian stocks saw volatile trade, with the benchmark Sensex in Mumbai falling sharply at the opening bell before rebounding to sit slightly higher in the afternoon.
Analysts say Patel’s departure, extremely rare for a central banker before the end of his term, is evidence that the RBI’s autonomy is under threat.
“This is a clear signal of an eminent institution being attacked and its independence being chipped away one step at a time by the government,” Independent Economist Ashutosh Datar told AFP.
“It is obvious Patel resigned because he faced a lot of pressure on issues such as bad loans, shadow banking, and the central bank’s independence.
“This will reflect badly on the government and probably affect the central bank’s sovereignty in the long run,” he added.
The Indian rupee has been one of Asia’s worst-performing currencies this year, although it has bounced back in the past fortnight, while economic growth slowed to under 8% in the July-September quarter.
It is understood the government is pressuring the bank to enact policies to help spur growth ahead of next year’s elections, when Modi will run for a second term.