25 October, 2020

Ain't Broke? Fix It!

Is a shackled rupee politically correct and economically incorrect?

Malay Karmakar
Ain't Broke? Fix It!
outlookindia.com
-0001-11-30T00:00:00+05:53
So Near Yet So Far

The RBI has 3 sets of reasons to delay full capital account convertibility:
  • A weak monetary and banking system, high fiscal vulnerability with oil price rise still unabsorbed and inflation not fully in control
  • Runaway currency appreciation and loss of monetary policy freedom
  • Volatile short-term or hot money coming in as well as big capital flight in case of political instability

***

It was the fastest major financial committee ever set up—just two days after the PM suggested it. Its report too was submitted in a record five months. But the second Tarapore committee—asked to examine if the time was ripe to make the rupee fully convertible—has raised more questions than it was mandated to answer. Going by current indications, Union finance minister P. Chidambaram's dream of attracting more FDI through a freer rupee is destined to remain just that. Even residents' hopes of getting more freedom to meet their forex needs is...

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