RBI should intervene to curb rupee appreciation: chamber

Wednesday, 15 October 2003, 19:30 IST
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CHANDIGARH: A leading industry chamber has urged the Reserve Bank of India (RBI) to intervene more actively in the foreign exchange market to limit further appreciation of the rupee. "This becomes very essential in view of lower appreciation of competitor countries and fixed exchange rate of the Chinese currency. Some tightening of controls on short-term capital inflows is also desirable," Phdcci, the industry lobby for northern and central Indian states, said Tuesday. According to a study by PHDCCI, interest rates in India are at least three to five percentage points higher in real terms than in the U.S. and other advanced countries. "Foreign investors, not only NRIs but also foreign institutional investors (FIIs) and hedge funds are now taking full advantage of this differential and pouring money into India, thereby putting pressure on the rupee. This calls for reduction in the rates of interest to a level which suits market conditions," it said. Suggesting that a portion of the country's foreign exchange reserves be set aside for export promotion and for prepaying costly debts, it said: "The government must promote exports aggressively and use the India Brand Equity Fund to create the India brand to boost export growth. "There is need to further liberalise our import tariffs in order to encourage imports and restore balance to the rupee. However, the customs duty rate should be so designed that it enables domestic industry to compete against imports." It recommended there should be three rates structure of customs duty -- lowest for capital goods and raw materials, higher for intermediates and highest for final goods. "Indian companies should be allowed to take an additional exposure abroad and create manufacturing assets. Indian companies should be allowed to acquire companies, brands and open offices abroad," the chamber body stated. "We also need to open up our foreign direct investment (FDI) policy along the lines of the N.K. Singh report in order to attract more investments. Acquisition of companies, especially those supplying intermediate goods or raw materials will also enhance the competitiveness of Indian companies." According to PHDCCI, there was an impelling need to build the political consensus to usher in second-generation reforms that would revive investment demand in the economy and further rejuvenate industrial growth.
Source: IANS
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