This refers to your edit Its yesterday once more (ET.10/09/09).No doubt our present economic scenario requires huge funds to support economic growth and minimise the consequences of fiscal deficit of very high order.The heavy inflows of forex resources beyond the absorbing capacity of the economy can tilt the calculations and bring disorder in exchange rate stability,inflation control,export, import and management of the economy.
The only way to tackle the influx is to absorb the excess funds without simultaneously creating supply of rupees in a separate account styled Foreign Exchange Inflows Stabilisation Fund with RBI. Banks, exporters, investors who ever have excess forex and do not require urgently can invest such excesses in this Fund for a small compensation and an incentive if required. Such a fund if created and encouraged even if at a small cost to the exchequer will obviate the need for immediate conversion of forex into rupees and consequent measures of steririsation etc.
This write-up appeared in ET dt12/10/09.
Dr.T.V.Gopalakrishnan
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