Most dramatically expanding economies have done so on the back of borrowing because, as national incomes increase, there are more and more institutions ready to lend and to invest in this growth. China and India have been no exception to this.

However, whereas in China the Communist government has complete control of the economy, including financial sector regulation, since India decided to go for growth and international expansion, successive governments in New Delhi have presented the Reserve Bank of India, the country’s Central Bank, as being independent, something which could never be claimed from its opposite number in Beijing, the People’s Bank of China.

But an independent central bank poses risks for any government wanting to borrow and spend without regard to the effect on the value of the currency and international confidence. When premier Narendra Modi blocked the renewal of the governorship of Raghuram Rajan in 2016, international markets were disturbed. Rajan was a former IMF chief economist who had taken on the RBI job tasked to clean up the country’s chaotic banking system and introduce transparency into its longstanding patronage and corruption. Modi, though publicly committed to an anti-graft drive, fell out with Rajan. There was relief, however, when the respected economist Urjit Patel became the 24th RBI governor and promised to continue with much of Rajan’s financial reform platform.

Now Patel too has gone and the Modi government has some explaining to do. It appears to have been caught on the hop by Patel’s resignation, which he said was for “personal reasons”. Nevertheless, it is an open secret that the governor had been at odds with the RBI’s 21-member central board of directors, which includes representatives of big business which has done well from the open-handed lending by state banks.

Modi’s people have said that they did not like the way that Patel was “internationalizing” the Indian financial system. This has depressed outside investors and immediately saw the rupee fall almost two percent against the dollar. Though he risks further inward investment and support, at first sight, Modi seems to be trying to move the Indian financial system more towards the tightly-controlled Chinese model. It must, however, be wondered if such a change could work.

More to the point, Modi is clearly thinking of the upcoming general election, which must be held before next May. The RBI’s continuing tight liquidity controls, holding back cash from a banking system overburdened with non-performing loans to the Indian oligarchs and their large corporations, is depressing the economy. Modi wants an economic good news story to tell the electorate. An official statistical review of economic growth has seemingly improved the performance of his administration by downgrading the figures achieved by its predecessor.

But there can be no doubting that serious banking reforms are still needed. The RBI vexed the government by exposing a $2 billion fraud at the state-owned Punjab National Bank. Unfortunately for the premier, shooting the messenger looks like political desperation rather than the wise implementation of the so-called Modiconomics. And it may not win Modi’s BJP next year’s election, not least because of the party’s worsting this week in the key state elections in Chhattisgarh and Rajasthan and Madhya Pradesh.