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Some Issues in External Sector Management
The Indian external sector has undergone radical changes post 1992. Against this background, an attempt is made to look at the role of the exchange rate, level of current account deficit, adequacy of foreign exchange reserves and capital flows, and capital account convertibility. The balance of payments in India has been managed well so far. There is a need to increase export competitiveness, which requires among other things an efficient, well-knit infrastructure. To prevent a rise in the real effective exchange rate, we should keep domestic prices stable. The surpluses in the services sector will also need nurturing.
This is the edited version of the Saumitra Chaudhuri Memorial Lecture delivered on 16 March 2018. The author is grateful to Priyadharshini for her assistance in the writing of this article.
It is a great honour to deliver the Saumitra Chaudhuri Memorial Lecture. More than an honour, it is my duty. For almost a decade, Saumitra and I interacted on a daily basis, examining many issues and problems confronting the economy. Saumitra was a versatile economist who was at home in every branch of economics. However, he was particularly focused on financial markets—both domestic and foreign—and the external environment. While he carefully looked at developments in most economies, he was especially a keen observer of the Chinese economy. Invariably, Saumitra wrote the first draft of the two reports which the Economic Advisory Council used to put out. It was his draft which was subsequently discussed and approved with whatever modifications that were found necessary. One must also mention the extraordinary feel that Saumitra had for data. It was in the fitness of things that he was asked to chair several committees to revise the data series, such as the Index of Industrial Production. His laptop was a treasure house of information. In the demise of Saumitra, the country has lost an eminent economist, a serious thinker, and a critical analyst. The country will sadly miss his inputs on policymaking. Since one of Saumitra’s interests was the external sector, I have chosen to speak today on some issues in external sector management.
Break with the Past
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