Stiglitz for a cautious approach on rupee convertibility

Mumbai, Dec 28 (UNI) At a time when the debate on full convertibility of rupee hots up in the country, nobel laureate and noted economist Joseph Stiglitz today suggested for a cautious approach on the issue.

Delivering a speech on ''Towards a new paradigm for monetary policy'', which was held at Reserve Bank of India (RBI) premises here today, Prof Stiglitz said that liberalisation of capital markets has witnessed more risk coupled with problems like less prudential behaviour and even lesser lending from the banking system.

It is to be noted that a committee led by S S Tarapore has already been formed by the Centre to chalk out a five-year plan in this direction.

Citing the Chinese example, Stiglitz said that even the communist country has now realised the capital market liberalisation. Coming to the frequent interest rate hikes by the banks in the country, he said ''It won't work in the country where 75 per cent of farmers were marginal ones'' He gave the example of Indonesia in this context, he said ''It is quite difficult to understand the dynamics of the marginal farmers''. He explained how the economy of a country could be controlled by focussing well on the inflation.

However, he warned that financial market capitalisation can lead to more risks.

If you get more inclusive credit, some of the marginal groups may get proned to high risks, he said and hence suggested for designing one's own managerial information system well to minimise this risk.

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