Matters Must Be Brought Under Control

The Reserve Bank got a new Governor on 4 September. It will be proper for the Government to help his work by taking certain steps which only the Government can take and not the Reserve Bank. For instance, we are importing 500 billion crores of goods, out of which 180 billion are for oil. The rest of the 320 billion he will definitely cut, should be 53 billion in gold alone. Then there are more non-essential items like electronics. In Government there is a temporary squeeze, let us say, upto March, 2014, the current account deficit will come down to 2.5 per cent, and that will reflect in the value of the rupee towards the dollar. Once that is done the Reserve Bank will not have to increase rates to control inflation. In fact, the new Governor can consider whether the rates of interest can be reduced to encourage Indian investments.
The economy is all about expectations. When the rupee is going down or the sensex is going down, it goes down because the majority of the investors have a pessimistic view of the economy. On the other hand, if people are optimistic it goes up. If confidence is created in the Indian investor by showing your seriousness and other corrections it will go a long way in bringing the economy back on track.
I know the present Government feels the IMF or the WTO may object to putting in restrictions. But even in their contract, in their agreement it is written that if there is a balance of payments problem, the country can always take a temporary reprieve from the agreed arrangements. Today, the balance of payments may not look critical but the majority of reserves are in the nature of short term deposits and once the economy starts collapsing that money can disappear within no time. It is a question of explaining to the IMF and the WTO and I am sure they will understand.
The more important thing is that you have to take bold steps to save your economy and your country. The present Finance Minister is intelligent enough to do that. The only thing is he has to open a dialogue with the IMF and WTO or announce the steps and then later explain to them. I don’t think there is any serious problem in doing that and on the contrary, if by March the economy looks up or becomes stable, it is good even for elections for their Government.
Just now two things are happening. On the one hand, we have the collapsing rupee, the collapsing share market, collapsing confidence. On the other hand we want money for the Food Security Bill, we wanted the new Land Acquisition Bill to go through, too many things are happening before the elections. We must start somewhere to bring matters under control, otherwise we will look as if we are anarchic.

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