The Reserve Bank of India (RBI) has asserted that it will not hesitate to use all available instruments to prevent downward rupee spiral
“Usually RBI does not strongly intervene in the currency market to achieve specific exchange rate targets. However, in volatile market conditions that we see today, RBI intervention to keep markets orderly and prevent a downward spiral of rupee is justified,” said Reserve Bank of India Deputy Governor Subir Gokarn in a video message delivered to the delegates at the Confederation of Indian Industry's (CII), ‘The CFO Summit 2011' with the theme ‘Changing dynamics of finance leadership' here.
“Our broad objective in such intervention is to ensure that we find a balance between the short-term risk of the rupee spiraling downward and the medium term risk of a loss of confidence in our ability to meet our external obligations. We do have instruments to do this in the form of strategic capital controls, which can be used to enhance supply of foreign exchange. These will be used when appropriate with the goal of ensuring that the availability of foreign exchange does not become a destabilising constraint. Beyond this, if we do see the short-term risk of a downward rupee spiral escalating we will not hesitate to use all available instruments,” Dr. Gokarn added.
On rupee depreciation, he said, “Resisting currency depreciation is best done by increasing the supply of foreign currency and by expanding market participation.”
Keywords: Reserve Bank of India, rupee fall
I see, I supopse that would have to be the case.
Rupee depreciation and Anti-graft movement: Anna Hazare seems to be great mover and shaker of the educated masses that gave him unprecedented support for his stand on corruption at high levels. The immediate repercussions for the same are evident in economic disaster on forex front. The Indian rupee depreciated most by over 18% in less than 3 months of his ending his fast on corruption issue. Here is how it probably worked for the INR: the government resolve to make an effective lokpal bill, and other anti graft bills, with promise to reduce corruption and punish the corrupt (though skeptical), arrest of central and other ministers and top corporate honchos created extreme fear in the minds of corrupt (specially the political and bureaucratic top brass) who immediately resorted to transfer of illicit wealth outside the country using liberalized RBI’s norms for investments overseas, other from of remittances and through underworld connections, purchase of precious metals in cash, and sustaining real estate markets in tier II and III cities. If the RBI makes a close investigation of forex outflows from non conventional channels, there will be great revelation of how rupee depreciated so sharply in its entire history (barring govt. planned devaluations in permit and license raj). The effect snowballed with worsening world economic situation, especially in Europe where Euro will in all probability disintegrate and countries will fall back to their own currencies in next couple of years. This scenario has made USD all the more powerful and only worthwhile currency of refuge even though US economy is in very bad shape.
Graft is an easy way to get fast decisions, and a pillar of fast economic growth for third world countries, as no decision or delayed decision is totally detrimental to any kind of progress and results in sustaining and increasing backwardness of the country (as it happened in pre liberation era for fifty years post independence –when small countries like Japan, Taiwan, Korea and lately “communist” China made phenomenal progress and improved living standards).The corrupt are always one step ahead of the law, and after a while, having amassed un-countable wealth, have so much clout on the enforcement agencies, that they transcends all legal, ethical and moral standards. This is evident so clearly in our country where there is extremely strong political, underworld, “babudum” nexus that is almost impossible to break. The embodiment of corrupt leads the country and tries their best to keep it under developed, poor and fearful all the time. The parliament houses the most corrupt, criminal and many anti-national elements. The corruption and unethical methods get so ingrained at every level of the society that it becomes almost a genetic trait, which grows with every generation, in almost all spheres of life. One wonders where all these will lead our conservative and god fearing but corrupt society to in coming decades. It is doubtful that our country will even exist in one piece fifty years from now!
The Reserve Bank of India (RBI) has asserted that it will not hesitate
to use all available instruments to prevent downward rupee spiral.making
such statements what RBI wants to prove as we all know control majors
should be applied soon otherwise its very difficult for our importers to survive in the international market.
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