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Handling the dollar rush

More often than not a dollar deluge is primarily due to a sudden and large capital inflow, and not a compression of imports

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Gurbachan Singh
India witnessed a dollar deluge in the last few months. This had more to do with a compression of the values of imports than with a large inflow of capital of different kinds. And, the Reserve Bank of India (RBI) managed exchange rate stability by increasing its foreign exchange reserves (hereafter, reserves) by a whopping $56.8 billion in five months. Should that be the policy more generally? 

More often than not a dollar deluge is primarily due to a sudden and large capital inflow, and not a compression of imports. If the RBI increases its reserves, the country incurs an opportunity
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper

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First Published: Aug 18 2020 | 10:21 PM IST

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