This refers to the report "Bernanke cold to Rajan remedy" (April 12). Raghuram Rajan, with his "hands on experience" on international economy and direct knowledge of emerging economies, has given practical and realistic suggestions to protect the currencies of such economies from volatility . His suggestions on the "safety net" and "multilateral body coming to help" will fall on deaf ears. In fact, Ben Bernanke, the former US Fed chairman, was the first to negate such an idea. The Eurpoean Union will also not buy this since its economies are in dire straits. Hence, the emerging economies will have to fend for themselves.
The basic lessons are: do not touch hot money for use as far as possible; do not allow the domestic currency to appreciate beyond a certain point; create foreign exchange reserves against all these inflows, which will come in handy later. In Bengal, there is a saying: Parer sona diyo na kaane, praan berobe hanchka taane (do not wear someone else's earrings since you will bleed when they are snatched away). Rajan has already started doing this in India. The emerging economies would do well to consider his methods.
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The basic lessons are: do not touch hot money for use as far as possible; do not allow the domestic currency to appreciate beyond a certain point; create foreign exchange reserves against all these inflows, which will come in handy later. In Bengal, there is a saying: Parer sona diyo na kaane, praan berobe hanchka taane (do not wear someone else's earrings since you will bleed when they are snatched away). Rajan has already started doing this in India. The emerging economies would do well to consider his methods.
Nirupam Haldar Kolkata
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number