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Journalism of Courage
NEW DELHI, May 2: India should not abandon its goal of capital account convertibility CAC because of the South-East Asian meltdown but ensure all safeguards are in place before the rupee is made fully convertible, chief economic adivsor to the government, Shankar Acharya, said.
Capital account convertibility does help bring in larger foreign capital flows to help the country8217;s economy grow but certain important parameters have to be met before the step is taken, Acharya said while addressing a seminar on the East Asian meltdown here last evening.
Unless these safeguards were in place CAC should not be rushed into, he warned. Countries, most affected by the currency crisis in the South East Asian region such as Malaysia, South Korea and Indonesia, had all introduced CAC. But the currency crises cannot be attributed to just CAC but a combination of factors, he said.
The S-E Asian countries had achieved a high growth under CAC but the economic boom turned into economic gloom because they failed tocontain the panic-driven depreciation. This undermines the fundamental strengths of the economy, he said.
Residents also took advantage of the CAC facility and began converting their currencies into dollars precipitating the crisis , he said.
Acharya said Indonesia, Phillipines, Thailand and Malaysia were all showing signs of recovery.
