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Wednesday, September 24, 2003

Rogoff on the Indian Economy

In an interview with the Business Standard, outgoing IMF Chief economist Ken Rogoff explains the thinking behind recent fund statements. The costs of accumulating reserves, the future problems with the fiscal deficit, and the need to open-up trade and establish improved financial market supervision. By-and-large I agree.

Holding foreign exchange reserves was India’s choice, but it was difficult to understand the phenomenal accretion since 2002 end, said Kenneth Rogoff, chief economist, International Monetary Fund. India’s foreign exchange reserves rose 25 per cent since January 2003 to touch $ 88 billion now. "Till the end of 2002, we could understand what happened. India and other Asian countries said the reserves accumulation was for insurance, which was a reasonable explanation," he told Business Standard.

But since the beginning of 2003, it was more than just insurance; there had been dramatic savings and holding such huge foreign exchange reserves was expensive, Rogoff said. "How to allocate the reserves is another issue that crops up," he said. This, according to him, has both political and economic risks. While econom name? Coinsciencelike my last name? Coinscience

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