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Re: Convertability, etc

I agree 110%. Devaluation for the sake of boosting exports is a 
futile exercise especially given the Marhall-Lerner condition where 
dBP/dEx < 0, which seems to hold for Indian Exports (demand for 
exports are exchange-inelastic). Since the first devaluation of
1966 courtesy Jagdish Bhagwati et al. a Rupee minted that year is worth 
only 9 paise today while our "Terms of Trade" (Relative price of Exports 
versus Imports)have steadily deteriorated.The Central Bank should have 
one goal and one goal only: price stability. Follow a policy of sound 
money and the forex markets will take care of themselves. There's an 
interesting open letter in today's WSJ (Aug 17th) from Jack Kemp to Alan 
Greenspan calling for a return to the pre-war Gold Standard. India might 
want to consider this approach given it's still-huge private gold 
reserves along with the current softness in the gold market. Pegging the 
Rupee to gold and turning its back on the disastrous IMF-World Bank 
Devaluation Regime may be the most important "Structural Adjustment 
Reform" India could make.
>> 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.
>The deval. of the rupee is the natural consequence of the economic
>policies we have followed which are known, in one word, as "socialism."
>Continue down this path and India has no choice but to keep devaluing/
>letting its rupee slide. (good for those of us who hold a few dollars,
>though! Stay out of India for a while!) 
>Devaluation is a sign of an economy's weakness. It is not a good thing 
>se. It is an inevitable thing for weak economies. Did anyone say that 
>the manifesto that it is a good thing? We must get rid of that too. 

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