Battling unintended consequences

................Then there was the push to encourage more foreign borrowing by Indian companies in the run-up to the financial crisis, despite the concerns of the Reserve Bank of India (RBI). Managing the sizeable capital inflows was already a challenge, and the central bank was also raising local interest rates to check inflation. Going abroad offered a convenient and cheaper unhedged option for companies, since they expected the rupee to continue to appreciate. Former RBI Governor Y V Reddy put a stop to the borrowing binge in 2007. That action, for which he was severely criticised, singularly prevented more painful fallout from the global financial crisis. But it did not prevent the inadequate preparation for dealing with the pressure of maturing external liabilities a few years later.............

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