RBI's move to check rupee rise criticised

A V Vedpuriswar, the dean of Knowledge Centre, Institute of Chartered Financial Analysts of India (ICFAI) University, Hyderabad, has taken exception to the efforts by the Reserve Bank of India (RBI) to check appreciation of rupee value against dollar.

Of the last 13 years, there had been appreciation in the rupee value in the last two years only. There was no urgency for the RBI to buy dollars from the market, he observed.

Speaking at a seminar on "Forex Reserves cross 100 billion dollars, a boon or bane", organised here under the aegis of ICFAI National College on Saturday, Vedpuriswar pointed out that the RBI had digressed from normal practice of buying goods and services which we did not have, with the excess forex reserves.

"The central bank was only subsidising the needs of foreign countries," he observed.

He said that the foreign investors had pumped money into our stock markets and other short-term profit earning instruments.

"Putting money into stock markets could not be called investment. If foreigners poured money into long-term projects, they could help develop our economy and mitigate unemployment problem. Similarly, liquidity of dollar or rupee would not determine its value. The value of a currency depended on the goods and services it could deliver at the global level," he said.

He regretted that not a single domestic brand of ours had international fame and consumption. "Even the hoopla about our software sector had been of no use. Our firms were yet to develop a globally competitive software product. Government, bureaucrats, even business scribes boasted of $ 100 billion of foreign reserves. Despite that our imports of capital goods had not gone up, no new infrastructure projects were taken up and our services had remained under-provided. Our trade balance stood at -13.1 per cent while that of China was at 22.9 per cent some months ago. The forex had not increased our GDP in the same ratio," he said.

GRK Murthy, the associate dean of ICFAI University, Hyderabad, said that though the forex position and our economy had improved tremendously when compared with our plight in 1990, we must be wary about the consequences if we did not put $ 100 billion to right and constructive use.

He reminded that China had accumulated $ 410 billion and small countries like Taiwan and South Korea gathered 196 billion dollars and $ 150.3 billion forex respectively. The forex, no doubt, had given confidence and boost to our economy, he said.