........In a rare instance of a former Reserve Bank of India official criticizing the bank, Rakesh Mohan said in an interview Wednesday that the lack of RBI intervention until the rupee's recent plunge are at the root of the country's current exchange-rate problems and, until recently, an acute shortage of cash in the domestic banking system. "We have had a policy of a managed float but without an exchange rate target" in the past, he said. "The rupee should reflect fundamentals and not the vagaries of capital flows.".....
2 comments:
Value of rupee should no doubt reflect the fundamentals of the economy which unfortunaleny are going weak every day. Inflation, GDP growth, fiscal deficit, current accout deficit etc have been moving from bad to worse and under these conditions expecting the RBI to maintain the value of rupee is akin to describing an elephant by a blind person. The rupeehas gone weak because of the mismanagement of the economy by the Government for past three years.The last budget gave the climax ie hit the last nail on the coffin. RBI has been doing its best to contain price stability through its monetary measures despite opposition both from the Govt and market,but inflation continues to defy as the Govt has not done enough to ease the supply constraints through fiscal and administrative measures. The blame game is on but people suffer due to weak rupee,inflation,corruption and black money for which RBI is helpless.
I agree with Dr T V Gopalakrishnan's views. It is unfortunate that Dr Rakesh Mohan who was part of RBI policy formulation for some time sees exchange value of rupee in isolation. He and several ExRBites holding key positions in Delhi today should persuade North Block to come out of the slumber and act faster keeping country's interests in view and for the moment forget about the coalition pulls and pushes. To make this happen, we may need individuals in high offices like FM with longer tenures and not waiting for the next assignment.
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