A Way Out Of India’s Balance Of Payments Crisis

By Chandrashekar (Chandra) Tamirisa, (On Twitter) @c_tamirisa

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India has left USD 279 billion to pay for imports for about 7 months. The country is trying to become more open to foreign direct and institutional investors to attract more dollars to stay afloat. This is time to think out of the box for India’s economic policy makers to avert a financial and economic crisis before elections are due in 2014.

India, the 4th largest economy in the world on a purchasing power parity basis, has more tools at its disposal than waiting for US dollars from abroad to fill its coffers for it to be able to import basics such as oil, gas and coal.

The Indian rupee must be fully convertible as a freely floating currency for India to transition it as a global reserve currency. India then must pay for its imports in its own currency and receive other fully convertible currencies in payments for its exports. Also, Indian multinational businesses must then be able to invest in foreign markets in rupees.

More importantly, a fully floated rupee frees up India to invest in its infrastructure and power sectors to bring them up to advanced country standards, befitting the stature of a large economy.

The time is now to fully open India’s capital markets.

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About Chandrashekar (Chandra) Tamirisa

http://www.thecommonera.com/Common_Era/Me.html
This entry was posted in Economics, Finance, South Asia: India, Pakistan, Bangladesh, Nepal, Bhutan, Burma and Sri Lanka and tagged , , , , , , , , . Bookmark the permalink.

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