CHENNAI, January 9: The Union finance minister, P Chidambaram today ruled out any `competitive' devaluation of the rupee to make good for the loss arising out of steep fall in the values of east and southeast Asian currencies."If you want competitive devaluation, I am ruling it out," he told a questioner at the special plenary on `Asian financial reforms and challenges for the new millenium," at the partnership summit now in progress here.
Admitting that Indian exports had been hit by the great Asian currency tumble down, Chidambaram, however, said the route to recovery was improving quality, reliability and delivery, and not merely devaluing the currency.
Pointing out that the Asian currencies were expected to firm up by the end of 1998, he said Indian exports would recover then. Exporters from the Asian tiger economies are making a windfall following higher realisation in their local currencies per every US dollar, the preferred currency for international transactions. Imports from those countries
have become cheaper in the international market as compared to imports from India, making Indian exporters call for competitive devaluation of the rupee).
Chidambaram admitted that exports had been hit due to the currency crisis, particularly in gems and jewellery, textile and leather sectors, but asked the exporters to wait for the Asian currencies to stabilise.
On the question of capital account convertibility (CAC), the finance minister said the country had a good roadmap and the government was carefully watching the sign posts. "We will not proceed unless the signposts are reassuring."
He said introduction of CAC alone would not cause a currency crisis, but one had to be careful in managing the process towards achieving capital account convertibility and running a supervisory system thereafter. In this regard, the government was closely monitoring the current account deficit, which could pose a problem if it exceeded eight per cent.
Similarly, private sector borrowings, if unregulated completely,
could result in misallocation of resources.
Thai dy PM cautions India
Thailand today cautioned India against plunging headlong into globalisation and urged it to learn from the mistakes committed by the Asian tiger economies which put them in a severe economic and financial crisis.
"Avoid repeating the mistakes we made. We were expanding our economies when we should have been consolidating, and we weren't forewarned of the dangers that lay ahead," Supachai Panitchpakdi, Deputy Prime Minister of Thailand, said at the CII summit.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
