India's economic policy will be the poorer after Rexit

RAGHURAM Rajan, governor of the Reserve Bank of India (RBI) since 2013, has decided to return in September to Chicago's Booth Business School, where he is on professorial leave. This was not a total surprise, but the news again raises questions about the RBI's independence.

Mr Rajan has taken the view after talking to the government that he does not have the administration's unequivocal support. He has decided not to wait until he is refused a second term after his three-year mandate runs out in three months. This is "Rexit" - India's equivalent of "Brexit", Britain leaving the European Union.

The episode dents India's reputation for maintaining robust institutions free of political interference. The government's abandonment of a tough anti-inflation central banker for reasons of party politics will not go down well on financial markets. As foreign investors decide their stance on India, the rupee is likely to come under pressure. This seems another case - seen already in the retrospective taxation wrangle over UK telecommunications business Vodafone - where the government places a higher priority on national sovereignty than economic prudence. As the UK EU referendum on June 23 nears, markets are already jittery about Brexit. Another rumpus is unwelcome.