Wednesday, April 15, 2015

Full Convertibility of Rupee Better to wait

The  thought going in for full convertibilty  comes without having full understanding of the implications of full convertibility.Indian Economy has not reached that stage and it will take a few more years to think of going in for full convertibility of rupee.The inflows and out flows of foreign exchange should emanatew fully from trade and commerce and there should be strong economic fundamentals like comfortable inflation level, fiscal and current account deficit,good backing of foreign exchange reserves, tolerable external debt and strong and dependable GDP growth.Here as it is, we have heavy black money accummulation both in domestic and international markets, uneven flows of foregn exchange, and a tendency to divert funds meant for production and infrastructure to short term speculative gains and total laxity in governance standards.Just expectations and rhetoric statments cannot be misunderstood for a strong conducive and favorable  economic and social environment to go in for full converibiity. It is nothing but an iinvitation for disaster which can be and should be avoided. The demand for  conversion of rupee into dollars cannot be easily met and the inflows and outflows of forex  from a speculative angle cannot be predicted and prevented to ensure stability of rupee. Jumping without a safety net from any height can only injure or kill the person.Better to be cautious .

Dr.T.V.Gopalakrishnan

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