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Re: Question

Hi Utkarsh: I have a Graduate Degree in Economics which probably means
I know just enough to be dangerous. With regard to your question about
granting independence to the Reserve Bank, this issue has cropped up
again and again since 1991 when the current reform process started.
My own view is that this should have been done yesterday. The way
our profligate central and state governments waste the taxpayers 
money is a crime. The way the Reserve Bank is currently set up makes
them complicit in such criminality. Basically, the Bank has to 
subsidize the profligacy of these governments through the overdraft
facility. This makes it no more than an extension of the Central &
State Finance ministries. Also, the only way to bring inflation 
under control in India is through monetary policy since fiscal policy
will be under the control of (mostly) incompetent politicians for
the foreseeable future. The RBI must have price stability as its only
goal and the only way to do that is by granting it full independence
from the various MoFs in Delhi and the state capitals.

Regarding convertibility of the Rupee, this can only come about once
our internal and external markets have been opened up to a degree 
comparable to that of the "hard currency" economies. Without such
a degree of decontrol, it would only invite a crisis of confidence in 
the financial and banking system. So it might be wise to wait for
more commodity and goods market liberalization before attempting
this one.

Utkarsh wrote:
>I have couple of questions to all the economists and people with 
>in financial markets in terns of policy formulation.
>Q1. If and why should Indian Governmentshoul make Reserve Bank of India
>of government control
>Q2. If an why shoul Indian government formulate a definite strategy to 
>Rupee fully convertible in future
>Hopefully I can get some insight on these questions.
>Utkarsh Kansal

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