tag:blogger.com,1999:blog-19649274.post8954010466349915718..comments2024-03-27T17:16:12.789+05:30Comments on The Leap Blog: RBI reaches for capital controlsAjay Shahhttp://www.blogger.com/profile/03835842741008200034noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-19649274.post-16287465757126898792011-12-28T12:42:19.127+05:302011-12-28T12:42:19.127+05:30Dear Ajay:
The forward contract position which man...Dear Ajay:<br />The forward contract position which many of the industry hold in their books will lead to a trouble postion with higher interest rate regime. The skewed cash flow postion for industry may lead to a troubled position due to ecomomic crisis.There is no options left in our system for swapping of contract with firms like oil companies who would like to get in forward contract as low at 41 or 43 per dollar .<br />The better bet it seems to be something like voluntary disclosure to bring back stuck balck money back to be pumped in the system.abdp76https://www.blogger.com/profile/10814368206923717923noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-13092223292036361882011-12-25T17:39:06.169+05:302011-12-25T17:39:06.169+05:301. "economic agents will be averse to holding...1. "economic agents will be averse to holding India risk. This is bad for asset prices in India"<br /><br />This observation is enigmatic to me<br />and seems to be more of a personal feeling of the Author, since, Economic Agents, who wish to do so, have been holding India Risk all the time; it is merely a highly variable risk perception on their part, which makes them invest or withdraw (in different degrees) from India. My qualitative feeling is that the RBI action would modestly influence their actions, if at all!<br /><br />2. Any of the Scholistic Readers of the Blog may help me if Federal Reserve of USA, Bank of England or the Bundes Bank of Germany have announced their shift to "Floating Exchange Rates" (I feel gratified, if the dates of such announcements are cited)<br /><br />3. I was a M.B.A. student in KUL in Belgium (1978-79) and could watch the attempts by SNAKE-members to keep the Snake in the Tunnel through actions similar to what RBI did just now; also, the concerted actions of US and Germany around 1986 stemmed the relentless appreciation of the Dollar (much attributed to large Capital flows into US during Regan era) and revived the rise of DM.<br /><br />3. The above instances are cited to support the ground reality that the Central Banks "Intervention Measures" did succced more often than not. I would surely admit the extent of Intervention was certainly on a vastly larger scale that what RBI did or could perhaps do (as Prof. Shah explained in RBI's case)<br /><br />4. Summing up, I wish to say that Capital Controls are indeed needed and could effectively be used and RBI should clamp the same at its wise discretion; let us also, appreciate, RBI is on its learning curve and is doing a laudable job all the time.Poolla R.K. Murtihttps://www.blogger.com/profile/13268390079827011335noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-42093493891535279012011-12-20T07:54:10.564+05:302011-12-20T07:54:10.564+05:30"Anonymous'" comments are interesitn..."Anonymous'" comments are interesitng. The strategic ambiguity about FX policy, then, is about as clear as its "multiple indicators approach" to monetary policy, no?<br /><br />So Ajay's conclusion still holds... this is lousy for RBI's credibility and can't be good for overall policy transmission.Andynoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-86895851557882799302011-12-16T22:59:16.770+05:302011-12-16T22:59:16.770+05:30Dear Ajay,
Reading the blog first time I agree...Dear Ajay,<br /><br /> Reading the blog first time I agreed with most of what was mentioned. But co-incidentally the weekly article of Gillian Tett, "Crisis fears fuel debate on capital control", in Financial Times discusses about likelihood of increase in activities of Central bankers in the future to use regulations as a tool for short-term macroeconomic policy. Now with increase in volatility of capital flows in the future the trend will increase. I am not sure if RBI can remain an island when all other Central Banks will resort to these type of activities. <br /><br />Thanks,<br />SritanuSritanu Chatterjeehttps://www.blogger.com/profile/01112398932644833536noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-39241120859203733092011-12-16T12:40:36.836+05:302011-12-16T12:40:36.836+05:30IMHO, RBI hasn't shifted to a floating rate at...IMHO, RBI hasn't shifted to a floating rate at all, because: a) they never said so, thereby reserving the right to intervene and b) they just intervened right now.<br /><br />The test of having shifted to a floating rate is what RBI does when the rupee breaks the recent extremes at 40 or 50. They have intervened at both ends. Not doing anything when vol is low and when the currency is at comfortable levels (2009/2010) is hardly an indication of having shifted to a floating rate.Anonymousnoreply@blogger.com