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RBI is getting eroded in a big way by the forex reserve they are holding due to rupee appreciation. A strong Indian economy, a strong Rupee, a week Dollar, a week Euro, make Indian currency play a very important role in the basket of currencies in the global
financial market by 2015. As Finance Minister and as RBI Governor, what should be done and not done in order to achieve this strategic objective?

Any appreciation in the rupee results in an erosion in the value of the RBI's foreign exchange reserves in its balance sheet. To neutralize the impact of the flow of foreign money coming to India on rupee appreciation, the RBI had been buying US dollars when it was valued at Rs. 49 till the present valuation of Rs. 42. Thus, it has already lost 20 per cent on the dollar value.

The value of the central bank's holdings in foreign currency assets and gold fluctuates depending on the exchange rate and gold prices. These fluctuations are reported under the head Currency & Gold Revaluation Account (CGRA) in the central bank's balance sheet. According to an estimate in a recent report by Kotak Mahindra Bank, the balance under CGRA has eroded approximately Rs. 36,080 Crore and now stands at Rs. 50,709 Crore.

A strong Indian economy, a strong Rupee, a weak Dollar, a weak Euro, make Indian currency play a very important role in the basket of currencies in the global financial market by 2015.

A Strong Indian Economy

What does it mean to India?

A strong Indian economy means a robust industrial growth, strong pool of foreign capital pooled with RBI, sound infrastructure, better standard of living, better per capita income, a comparable standard of living, better employment opportunity for all, mature financial markets, 100 per cent financial inclusion, better amenities and hygiene facilities.

Do we have that?

No, we stand 148 in Global Human Index. We are supposedly slightly better than African countries and at par with South Americans. Our infrastructure is poor, unemployment is high, government's initiatives and 5-year plans are pathetic failures.

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* Contributed by: -
Prem Kumar (Finance) & Manvendra Pratap Singh (Marketing),
ICFAI Business School, Hyderabad.