..... is a foregone conclusion that the RBI will need to increase its foreign reserves or India’s external liquidity ratios will worsen further. Such an outcome will raise more worries among sovereign credit rating agencies. However, the increase in foreign reserves will occur only when India begins posting overall BoP surpluses and the RBI intervenes to prevent rupee appreciation. India is not there as yet but the current adjustment to narrow the current account deficit via below-trend growth is a step in that direction........
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1 comment:
A well-balanced analysis of the present policy scenario. Here again RBI may not be able to make the right noices or bring about changes suggested here unless there is strong fiscal policy support. First, our economic advisors in Delhi must convince GOI the need to augment the forex reserves and generally strengthen the balance sheets of major national level institutions including RBI and al public sector organisations including PSBs. Cash-rich private organisations should be made to take supportive measures. The governemnt should resist the temptation to depend on public sector organisations including RBI and PSBs for 'window-dressing' budget. These institutions should be allowed to plough back profits for developmental initiatives and for augmenting reserves.
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