The long queue for
Dollar at the Foreign exchange counter in India reminds the ‘bank run’
narrated in Arthur Hailey’s Novel, ‘The money changers’. In the novel the Bank
was saved by a man when he came forward to deposit his meagre savings while all others were in queue to withdraw money The mood of the aggressive crowd was suddenly
changed positively in favour of it and the crisis blew over.
Actually the similarity ends just at the sentiment of
investors, because a
bank can bust if all its customers demand their deposits on one bad morning,
but not a nation like India.
India’s two major import items are Crude oil and Gold. As a result of India’s love for gold, there is
an impressive stock of the yellow metal under Government stock, among the public
and in other institutions including temples. In temples like Thirupathi there
would be enough gold to pay out the entire balance of payment of India.
Similarly, the gold among the public is estimated at twenty five thousand
tonnes.. The problem is to find a viable mechanism to make it support the
economy. The gold bonds are an option. In earlier times the currencies were
propped up with the support of gold, now the value of currencies are left to
decide by the market forces and the gold
reserve does not come in the reckoning. I am of opinion that gold stock of the
country should also be given a place while rating a country’s economy.
Any way India will survive the present crisis. It can issue
gold bonds or auction some gold in Government stock. But the real problem is its political class
and their vote oriented mind set. Many a reform measures had to put off by the
objection of the supporting political parties which sent out negative message
to the foreign investors. They rightly doubted India’s ability to carry forward
reforms.
India failed to give proper incentives and encouragement to the foreign investors to invest in infrastructure and industries. India's neighbour Bangladesh is an example, the Bangladeshi currency, tak, is gaining strength against Dollar when Indian currency is sliding. In Bangladesh the foreign investors have invested in industries which cannot be withdrawn as easily as investments in shares. India's foreign investment in shares have brought in the twin danger of falling rupee and share value simultaneously, creating a financial catastrophe.
Finance needs meticulous management and India needs to learn a lot in that sphere.
India failed to give proper incentives and encouragement to the foreign investors to invest in infrastructure and industries. India's neighbour Bangladesh is an example, the Bangladeshi currency, tak, is gaining strength against Dollar when Indian currency is sliding. In Bangladesh the foreign investors have invested in industries which cannot be withdrawn as easily as investments in shares. India's foreign investment in shares have brought in the twin danger of falling rupee and share value simultaneously, creating a financial catastrophe.
Finance needs meticulous management and India needs to learn a lot in that sphere.
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