Don’t rely on IMF: World Bank chief economist
20 Aug 2013 10:55 PM GMT
With the rupee sliding below the 63 mark against US dollar, World Bank chief economist Kaushik Basu on Monday said that the country should use forex reserves to curb volatility in the currency market and not to look to IMF for funds.
'To use certain amount of your forex to buy and sell dollar I think (is) a good idea...(It) gives out signal that reserve has a purpose. That is broadly the direction we should go and use reserves to curb turbulence', he said while delivering the 16th JRD Tata Memorial Lecture here. Basu, who was chief economic adviser in the Finance Ministry before taking over his assignment with the World Bank, said the government should not 'overreact' to depreciation of rupee.
'There was a sudden depreciation in exchange rate but we must not overreact to that. We do need steps to correct it. The certain amount of buying and selling of foreign exchange is the technique that is done in floating exchange rate market...that method could be strategic intervention,' he said.
Basu dismissed the suggestion that India was facing the same problems as it witnessed in 1991 when the country's forex reserves dipped to a meagre $3 billion.
'Are we back to 1991? That is completely a non-question because if you just look at a couple of numbers, then you say there is absolutely no comparison. Foreign exchange reserves in 1991 was down to $3 billion, India now sits on $280 billion foreign exchange reserve,'
he said.
'To use certain amount of your forex to buy and sell dollar I think (is) a good idea...(It) gives out signal that reserve has a purpose. That is broadly the direction we should go and use reserves to curb turbulence', he said while delivering the 16th JRD Tata Memorial Lecture here. Basu, who was chief economic adviser in the Finance Ministry before taking over his assignment with the World Bank, said the government should not 'overreact' to depreciation of rupee.
'There was a sudden depreciation in exchange rate but we must not overreact to that. We do need steps to correct it. The certain amount of buying and selling of foreign exchange is the technique that is done in floating exchange rate market...that method could be strategic intervention,' he said.
Basu dismissed the suggestion that India was facing the same problems as it witnessed in 1991 when the country's forex reserves dipped to a meagre $3 billion.
'Are we back to 1991? That is completely a non-question because if you just look at a couple of numbers, then you say there is absolutely no comparison. Foreign exchange reserves in 1991 was down to $3 billion, India now sits on $280 billion foreign exchange reserve,'
he said.
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