A Learning from China for managing Forex
The Finance minister of India expressed the need for his country to learn the technique of managing finances correctly from the experience of China.
Finance minister of India, P. Chidambaram was present along with Bharti Enterprises chairman Sunil Mittal and CII president R. Seshasayee, to attend an annual general meeting of the CII in New Delhi, India, on May 24, 2007.
Alongside, Mr. Chidambaram also said that they required for better management of foreign funds in India, for counterbalancing their influence on the overall prices as well as the exchange rate.
The sudden fluctuation in the market hurts investment, and therefore, the overall trade and economy of any country whose market is moving unstably.
In India, with the massive inflow of US dollars, there has been a rise in the rupee, which is hurting a few exporters as well as affecting the overall market. This movement in the market has been playing a crucial role in inflation.
In the CII annual meeting, the Finance minister also stated that India must learn to control as well as manage these overflows. Although, he also said clearly that not too stringent measures should be taken which may lead to a restricted investment.
Discussing Forex, talks were held regarding the depreciation of rupee to a 40.60 against the dollar, although it had been on an upward trend since a few weeks now.
The major hand in the upward trend for the price of the Indian Rupee was that of the overseas borrowings by some companies, direct foreign investments and stock purchases by worldwide funds. All these factors have together powered the rupee upwards by almost 14 per cent in a period of about 10 months.
The reason for the overflow of US dollar in the Indian markets is also being said to be the absence of Reserve Bank of India from the Forex markets, which is said to have added to the flow.
Whenever the Indian Rupee fluctuates, the RBI often plays the role of an intervener to keep a check on its rise or fall, trying to balance it and guard the interests of the exporters.
The figures revealed in the meeting stated that the US dollar purchases done by the Central Bank of India had declined to a figure of $2.3 billion in the month of March as compared to the purchase figure of $11.9 billion in the month of February.
The measures which were being planned to be taken up to control the US dollar overflow included the restrictions which would be placed by the Indian government on the external commercial borrowings (ECBs) by the real estate and property companies.Â