SME Times News Bureau | 21 May, 2010
India's chief statistician Pronab Sen Thursday said that India needs to re-examine its current exchange rate policy keeping in view the changing economic scenario.
Addressing an event at the PHD chamber, Sen said that the country has to evaluate the public policy towards management of exchange rates as the context has changed and today financial flows have overtaken real flows.
"We need to look closely at the kind of capital or financial flows required to spur investment. Once this is done, we have to identify the gaps and then see how to fill in the gaps. In doing so we have to recognize the dangers of such flows and take enlightened decisions," he viewed.
To the question whether RBI intervene in the forex market to stabilize the rupee, he said that RBI has neither the size nor the experience to operate in foreign markets. Hence, it can only operate in the domestic market, he said.
Sen also added that the concern about rupee appreciation is greater today as the options of increasing efficiency in the system are limited unlike in the past.
In the backdrop of the latest crisis that has enveloped major economies in Europe, he advocated the need to integrate monetary and fiscal policy measures to insulate the economy and ensure a consistent rate of growth of more than 9 percent for the economy.
"Integration of monetary and fiscal policy measures are important to achieve the desired growth rate," Sen said.
The chief statistician also viewed that the RBI is in a dilemma on whether to control appreciation or inflation as a rise in interest rate to curb inflation would increase the return on assets and thereby raise capital inflows.
INTEGRATION OF MONETARY AND FISCAL POLICY MEASURES NAGESH | Sat May 22 05:06:55 2010
It is rightly stated that integration of monetary and fiscal policy mesures will lead us to achieve a desired growth rate.Cash inflows dictate quantum of foreign exchange earnings and a concerted effort is imperative to create a favourable rupee value value against other hard currencies
