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Re: What is good?



Hi Sanjeev,

I have a question on Convertibility. I had
actually posted aginst it hoping for a discussion
so that I might be enlightened about points I might
have missed. How is it beneficial? In the steady
state, isn't the expected return from the system
the same whether we have convertibility or not.
It just seems to increase the amount of risk and
rewards that one can get in one shot. It also
opens the door to undesirable speculation.
Can we not achieve the same thing without full
convertibility keeping other things the same. Of
course, those who need to convert for genuine 
trade can be provided the currency.
On the other side, allowing convertibility freely
might not at all have much negative effect. Even
if we assume that people will convert to dollars,
it will still be deposited in dollar deposits 
within the country itself.

And on the question of sliding rupee, I have the
following doubt. Why should it be welcomed as
something that boosts exports? Isn't that a
short sighted view? Let me explain my understanding.
Please tell me what is wrong. Since the volume of
goods that goes out increases but the total
incoming ccurrency does not, it means that more
goods is being produced but it is not being
rewarded. So as a country we are poorer and
suffering more.

If a sliding rupee generates additional income
in the days immediately following the slide,
shouldn't that money be used to improve
infrastructure so that in future we do not have
to depend on a weaker rupee to improve exports.
So why this rejoicing by exporters every time that
rupee falls? Moreover a sliding rupee will 
encourage flight of capital.

Thanks in Advance,
-Arvind

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