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RBI employees oppose capital account convertibility

Written by: Staff
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Kolkata, Mar 23 (UNI) The All India Reserve Bank Employees Association (AIRBEA) has expressed concern at the appointment of a high power committee for setting the framework for fuller capital account convertibility.

" This move for full float of rupee after deferrment of earlier attempt to this effect as a follow-up of Tarapore Committee's recommendations and its roadman is really surpirising, " AIRBEA All India Secretary Samir Ghosh in a statemebnt here today said.

He said the country could have faced the same disastrous consequences like those happened in later 1990s engulfing most of the East Asian countries, had the full capital account convertibility was in force as desired by the then Government.

" It is well known to all that macro-economic fundamentals of those affected countries are very sound when their economies are disrupted by withdrawal of FII's investments and flight of finance capital. Hence, the current economic indicators like the forest reserve, upward trend of share markets and low inflation rate justifying the introduction of full capital account convertibility is totally misleading if viewed in the context of experience of East Asian melt down, " Mr Ghosh said.

Stating that even in the recent credit policy announcement RBI had expressed concern about international oil price volatility and its likely future impact in India, the AIRBEA general secretary said in the Banking sector also the interest rate was hardening up.

" All these do not augur well for future shape of our country's economy, " he felt.

The growing deficit of current account shows rapid increase of imports causing alarming trade-gap, Mr Ghosh said adding if sentiment of markets changed, foreign investment would fly to favoured destination.

Besides, in the regime of full currency convertibility, the situation would inevitably arise leading to switching of Bank deposit to foreign currency and remittance thereof to other countries.

Taking into consideration all these factors, Mr Ghosh felt that it was always advisable for a developing country not to go for full capital account convertibility with China being the ideal example.

Peoples Republic of China had a very comfortable foreign exchange reserves amounting to 470 billion dollars and huge trade surplus, but still China was not keen on capital account convertibility.

The so-called emerging economies namely Brazil, Argentina, Chile and East Asian countries had been devastated following introduction of capital account convertibility as dictated by the IMF and the World Bank.

" It is in the aforesaid context we express our strong opposition to sudden public announcement of the Prime Minister to force RBI to revisit the issue of capital account convertibility, which is an irreversible process and urge the Government to desist from dollarisation of country's economy,when Indian rupee will be relegated to a secondary position in India market, " Mr Ghosh said.

The AIRBEA also appealed to all political parties, eminent economists and people at large to say "No" to the proposed move of Capital Account Convertibility ostensibly under pressure of finance capital.

UNI ABA SJC AB 1727

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