.....Witness the Approach Paper's slant of cutting down the Reserve Bank of India (RBI) to size by taking away a large part of the domain of its operations, ostensibly, on the ground that the RBI should exclusively focus on monetary policy. The Bond- Currency- Derivatives markets will be totally out of the purview of the RBI. A glaring feature of the Commission's recommendation is to take away capital controls from the RBI and to lodge this in the Ministry of Finance- all in the name of Full Capital Account Convertibility! Consistent with the stance of the Approach Paper it can be inferred that the RBI would have no say in exchange rate management and forex markets, and therefore, forex reserve management. The RBI's handling of the 1991 forex crisis is internationally recognised, as is its gradualist approach to capital account convertibility. This whole issue is not only whether India abolishes capital controls altogether but an issue of managing the entire external sector. It would be a monumental blunder to go along with the FSLRC recommendation to strip the RBI of its role.......
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