The Hindu Business Line : Moving forward on forex

The editorial "Battle of the forex bulge" (Business Line, April 26) rightly observed that the slew of foreign exchange market-related announcements by the RBI in its latest Credit Policy statement is but an initial move towards gradual dismantling of controls on capital account transactions.

Indian corporates can now invest more money in overseas stocks and even individuals and retail investors can make larger investments in such equity. Perhaps, the RBI wants Indian corporates and other investors to buy larger quantities of foreign exchange for the purpose of investment abroad. This will facilitate acquisition of corporate entities in other countries by Indian companies.

The RBI has opened up outward flow of foreign exchange to utilise the growing stock of forex reserves.

After having tightened domestic sources, the RBI has now shifted its attention to the issue of tackling liquidity in the system originating from the overseas markets.

The RBI move is timely and in the right direction. But to what extent the new initiative will help in motivating investments in overseas stocks by Indian corporates and retail investors is difficult to tell.

K. K. Ammannaya

Udupi

Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in

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