But how to use the RIB bonanza? The country's foreign-currency reserves at around $26 billion provide import cover for more than six months; the annual import bill is around $42 billion. The State Bank of India, the lead manager, is putting RIB dollars with the Reserve Bank to swap these for government securities. About 36 per cent (comprising SLR of 25 per cent and CRR of 11 per cent) will be swapped. The balance 64 per cent will be with State Bank to lend. But it will lend mainly in rupees. So the whole of RIB collections will add to reserves. Unless domestic investment picks up, the requirement of imported plant, machinery and components will not rise much; and unless the industrial recession lifts, the demand for imported intermediates will continue to limp. The bulk of the RIB dollars will remain as unused reserves. Even so, having extra reserves these days is not a bad thing in itself; every FII outflow and talk of pressure on East Asian currencies adds to the speculative pressure on the rupee. RIBdollars should help moderate fluctuations.

What after the swap? There will be large funds with the State Bank. It can dictate the terms at which it will invest in government securities. Note that the government is a heavy borrower this year. The interest on government borrowings should inch up. With this, interest rates on lending to the commercial sector will also tend to move up. This is hardly a prospect that the recession-hit economy will look forward to. But unless the funds are sterilised, excess liquidity in the financial system will lead to speculation against the rupee. The strategy of raising mega funds abroad was implemented without giving much thought to how they would be used. The State Bank has talked of financing infrastructure projects. The government has talked of accelerating the financial closure of power projects. But there are few projects on the ground.