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Tuesday, Jan 31, 2006


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Forex reserves

At the Davos meet of the World Economic Forum, the Finance Minister is reported to have blamed industrialised nations for global economic imbalances.

He has referred to the reverse flow of capital from developing to developed countries and pulled up the US for its budget and fiscal deficits resulting in high interest rates. This is rather amazing.

India is sitting on a pile of forex reserves and not utilising them for domestic development. It is under no compulsion to invest them in the West.

The Finance Minister should be aware of the Tamil proverb about a man searching for ghee while holding a cup of butter!

Instead of utilising our own resources he is asking for foreign investment that will only create problems on the money supply and exchange rate fronts! Interest rates in the West are still low compared with India's.

The near-zero rate of interest has prevailed in Japan for a long time.

If interest rates are rising now it helps India in increasing its returns from its investments abroad.

A. Seshan

Mumbai

Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in

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