Friday, August 16, 2013

India's Foreign Exchange Crisis

Rupee continues to be on a downward spiral. Finance Minister's expedient bravado that we are not helpless has few takers. Desperate steps taken by RBI indicate that the central bank also is at its wit's end.

RBI has initiated many steps to encourage larger inflow of External Commercial Borrowings. These are short-sighted and are likely to cost us heavily in the future. Similarly, various decisions on gold imports taken by RBI as well as Ministry of Finance are dysfunctional and are apt to lead to more smuggling of precious metals.

Government's inability to provide conducive governance for industrial progress and enhanced exports is the main cause for currency turbulence. Awkward manipulation of time-tested guidelines will only queer the pitch further. Lack of good governance adversely impacts the country's economy in diverse ways.

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