Financial Daily from THE HINDU group of publications
Tuesday, May 13, 2003
Financial Daily from THE HINDU group of publications Tuesday, May 13, 2003 |
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Opinion
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Letters Forward dollar
The large unhedged forward dollar exposures will pose a potential threat to the country's economy once the rupee weakens against the dollar. History is replete with instances when large unhedged exposures ruined economies and Banks to such an extent that many countries failed to recover even after a decade or so. The responsibility of prudent foreign exchange management entails Reserve Bank of India (RBI) to immediately come out with measures that will stem the trend of corporates rushing to sell their forward dollars and keeping their forward commitments open, rather than meekly advising corporates to hedge their forward exposures. This is important because India is still a nascent economy, and any shocks on account of the rupee weakening will have a devastating effect. It also has to be borne in mind that the rupee appreciation is because of the rupee's inherent strengths but due to the dollar losing against other major currencies. On the positive side, this is a good opportunity for the government to channel the huge dollar inflows into productive areas of the economy. At a time when there are no concerns about liquidity and forward premia are at historic lows, the Centre, through the RBI, can think of buying forward dollars and invest it in infrastructure. Anand Ram Seshu Hyderabad Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in
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