Letters: IMF - The third alternative

A K Bhattacharya's column "Are we headed to the IMF?" (Raisina Hill), and the report "Is IMF loan a viable option?" (both July 29) are comprehensive in different ways with regard to the question on whether or not India should take a loan from the International Monetary Fund (IMF). However, there is a third alternative.

India can take an option to borrow. This is called a credit line. This is different from an actual loan. It is, as mentioned already, only an option to take a loan. The option may or may not be exercised depending on the circumstances. A credit line is a safeguard and works somewhat like foreign exchange reserves, though, the cost can be less. Foreign exchange reserves in India have declined over time. This is particularly true in relation to the national income. Many feel that there is a need to supplement these. However, they need not be supplemented by more reserves. Instead, these can be supplemented by cheaper credit lines.

There is, of course, an issue of conditionality. However, this can be less stringent for credit lines (and a possible loan at a later stage) than for an actual loan at a time when a crisis has already hit. At present, we may be in a difficult situation but we are not in a crisis situation. So, credit lines are in a relative sense, a good choice. Credit lines are worth considering even if we are not in a difficult situation. It is a precautionary measure.

Gurbachan Singh Gurgaon

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