Article;
Currency the Latest Threat to Global Economy
Comment;
If its is in
interest of a country to resort to devaluation to get a competitive advantage
then its also in the interest of a country to let its currency appreciate.
Because by doing the former we let employment increase within the economy and
by doing the latter we let employment increase in foreign. Both ways demand
increases. We need to follow some rule to eliminate unemployment and
deficit/surplus for the economy. And unemployment at five percent is feasible.
It is in the
interest of India to let its currency appreciate. Our trade gap suggest that
our exports need to increase to eliminate CAD. Exports bring foreign exchange,
more power to exploit a situation. RBI can buy or sell dollars to contain its
right value.
Import
substitution is a prompt reply for high imports, straight from text books. But
imports are here because we can not produce cheaper import substitutes. The day
we will be able to do that we will be in the line of competing with China. But,
we have a lower wage rate, if we get cheap know how we will be able to fill the
CAD gap.
For India
appreciation is the way to go because that will improve the purchasing power of
the Indian Rupee. Imports will become cheaper. Oil and gold too will become
cheaper. For the Indian- Economy unemployment is not a big problem but skills
are, therefore, we do not need to boost exports too much in order to boost
per-capita income and reduce inequality. We are not that dependent on exports
and external demand to increase employment and growth...
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