RBI not to speed up external liberalization

By agencies   |   Friday, 24 June 2005, 07:00 Hrs
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LONDON: Though IndiaÂ’s foreign exchange reserves are adequate, the Reserve Bank of India is unlikely to yield to pressures for significantly accelerating the pace of external financial liberalization, its Governor Y Venugopal Reddy has said.

"Reserve adequacy may be a necessary condition but not a sufficient one for speeding up financial liberalization," the RBI governor said here yesterday while delivering a lecture on Overcoming Challenges in a Globalizing Economy - Managing IndiaÂ’s External Sector here.

On the path of integrating the Indian financial markets with the global financial system, Reddy said "we have chosen to proceed cautiously and in a gradual manner, calibrating the pace of capital account liberalization with underlying macroeconomic developments, the state of readiness of the domestic financial system and the dynamics of international financial markets."

He noted that the adequacy of foreign exchange reserves was often cited as a consideration for significantly accelerating the pace of financial liberalization. "Foreign exchange reserves are, in the final analysis, a cushion to withstand both cyclical and unanticipated shocks."

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