The Hindu Business Line : Dollar distress

This refers to the article titled `US on notice: Cut spending fiscal deficit' (Business Line April 25). The US economy is passing through its worst phase and may even collapse. Leading investment guru Warren Buffet is also sceptical about the position of dollar. Countries that have invested heavily in dollars may find themselves in a fix.

If China does not succumb to the pressure tactics of the US on the revaluation of remninbi, then the imposing of the economic sanctions against it will make the position of India vulnerable. This may be one of the reasons for China taking a soft approach towards India.

The crucial test of the RBI is the effective and efficient framing and implementation of the Forex management policy. RBI should give up its obsession with dollars and start offloading it. Investment in Euro or the Pound Sterling may be a short-term cure.

Before the fiscal deficit of the US gets out of hand, policy makers and RBI think-tank must take proactive measures to keep India's economy safe and secure.

Suhas S. Bohra

Mumbai

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