Articles by Suman Bery

Cross-border finance will increasingly be shaped by the fiscal crisis in the advanced countries.

To what degree does the work programme and the initial decisions mandated by the g-20 address the issues that are of concern to the major emerging markets, and what cues should the latter group derive from the deliberations thus far? The heated discussion at the g-20 on a coordinated fiscal stimulus has crowded out a much more difficult and important debate on the issue of global imbalances and mechanisms to intermediate these. Much of the current work emerging out of the g-20 remains oriented to the political and economic predicament of the advanced economies.

There is a case to be made for rapid progress towards capital account convertibility and a free float of the rupee as the 'fear of floating' is based on the unwanted dirigiste assumption of the omniscience of bureaucrats and the irrationality or ignorance of private agents.

India should use the opportunity presented by high reserves and low domestic inflation to now fully open the capital account (with a proviso about borrowing in foreign currency), make the rupee fully convertible and allow it to float freely. For in a world of fluctuating capital flows it is impossible for the authorities to predict, let alone implement, the requisite movements in the nominal exchange rate required for a managed float. If this is done, none of the fears that the authorities seem to have about absorbing capital inflows would be realistic and India could very quickly raise its growth rate, which continues to be suppressed by the misalignment of the real exchange rate.