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REIMAGINING INDIA Figure 3: Post-reform Exchange Rate Variability Prior to 1991, the exchange rate regime in India, was pegged to a currency The plots show the nominal exchange the currency. basket. Hence India had a fixed rate rate remained almost stable during the regime. Figure 1 plots the exchange rate two decades of the 1970’s and 1980’s. and its annual change, for rupee from The rate of change moved in a band of 1970 to 1990. A positive change +/- 6 percent in the 1970’s except for indicates depreciation and a negative change indicates appreciation of percent due to the oil price 1979 when the rupee depreciated by 10 shock. During the 1991 financial crisis, faced with very low forex reserves the government floated the rupee, though the transition was gradual. Between 1991- 93 there was a dual exchange rate regime and the rupee was subsequently floated in early 1993. International experience has shown exchange rate variability increases with a change to a more flexible rate regime. This has not been the case for India even after a decade of a floating rate regime as evident from the Figure 2 which plots the real effective exchange rate for the rupee from 1993-2002. This is essentially because a stable exchange rate remains an important objective of government exchange rate policy. Saggar (1999) notes the RBI’s intervention (measured by changes in foreign reserves) has in fact increased in the post 1993 period. The central bank has used both direct and indirect methods of market intervention. 5 The main objective of government policy is to keep the exchange rate aligned with the fundamentals of the economy like inflation. Thus the exchange rate depreciated by 1.5 percent in September 1997 and the speed of depreciation was moderated by intervention sales by the RBI. In the central banks’ own words “...the conduct of exchange rate policy was guided by the need to maintain a delicate balance between the considerations of external competitiveness and price stability” (RBI, 1997, page I-9). This is also confirmed by analyzing the standard deviation of the rate of change in exchange rates, a measure of variability of the exchange rate. The standard deviation was 4.7 from 1970-80, 4.6 from 1980-90 and 4.7 from 1993-2003. This 122 THE IIPM THINK TANK
MORE MARKETS, LESS GOVERNMENT Figure 4: Trends In Major Macroeconomic Indicators (1970-99) evidence clearly indicates that although the rupee has been floated, the government plays an important role in influencing demand and supply of forex reserves and thereby the exchange rate. 4. Post-1991 Banking Reforms Financial sector reform was launched in 1991, based on the recommendation of the Narsimhan Committee (1991) that was set up by the government. The 1991 financial reforms were based on five fundamentals: Strengthening prudential norms and market discipline, appropriate adoption of international benchmarks, management of organiza- THE INDIA ECONOMY REVIEW 123
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THE INDIA ECONOMY REVIEW 2007 Volum
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ethink edify edify delineate rethin
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SEARCH, SIEVE, SCHEME... “Researc
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Christopher LINGLE, Professor of Ec
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REIMAGINING INDIA rights as group r
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Lawrence Surendra, Planning Commiss
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REIMAGINING INDIA of globalization,
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REIMAGINING INDIA systematic underi
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REIMAGINING INDIA and South-East As
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Pradeep Banerjee, Independent Consu
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REIMAGINING INDIA yet another Scot
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REIMAGINING INDIA ‘native despot
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REIMAGINING INDIA mean a slow down
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Anandajit Goswami, Associate Fellow
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REIMAGINING INDIA country grows it
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Amal Sanyal, Associate Professor, L
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REIMAGINING INDIA then the resource
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REIMAGINING INDIA entry tickets or
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Nilanjan Banik, Associate Professor
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REIMAGINING INDIA Table 2: Reforms
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Shripad Dharmadikary Manthan Adhyay
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REIMAGINING INDIA the same. The pro
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REIMAGINING INDIA has a religious g
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D.M.Diwakar, Professor of Economics
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REIMAGINING INDIA During 1990-91 to
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REIMAGINING INDIA was lowest in STs
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REIMAGINING INDIA cide in Wayanad D
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REIMAGINING INDIA which is always d
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Anu Singh, Professor of Economics,
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REIMAGINING INDIA age in the eighti
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REIMAGINING INDIA period. Also, the
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Anindo Banerjee, Head, Programme In
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REIMAGINING INDIA a complex interpl
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REIMAGINING INDIA solution, or do t
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Anjani Sinha Managing Director & CE
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REIMAGINING INDIA let us take the c
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Page 79 and 80: James Tooley, President, The Educat
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Page 85 and 86: Stephen P. Heyneman, Professor, Int
Page 87 and 88: REIMAGINING INDIA Figure I: Ranking
Page 89 and 90: REIMAGINING INDIA democracy to limi
Page 91 and 92: REIMAGINING INDIA free of private c
Page 93 and 94: Jharna Pathak Assistant Professor,
Page 95 and 96: REIMAGINING INDIA Figure-1: Total G
Page 97 and 98: Ahmedabad Amreli Banaskantha Baroda
Page 99 and 100: REIMAGINING INDIA Table-3: Details
Page 101 and 102: V. Shunmugam D.G. Prasad Chief Econ
Page 103 and 104: REIMAGINING INDIA Table I: Volatili
Page 105 and 106: REIMAGINING INDIA commodity derivat
Page 107 and 108: Deepika Wadhwa, Research Scholar, C
Page 109 and 110: REIMAGINING INDIA 2006. Besides, In
Page 111 and 112: REIMAGINING INDIA 2006-07 (April-Oc
Page 113 and 114: REIMAGINING INDIA Table 4: Acquisit
Page 115 and 116: Anurag Sharma Research Fellow, Facu
Page 117 and 118: REIMAGINING INDIA rural areas to pr
Page 119 and 120: REIMAGINING INDIA Table 2: Cost Of
Page 121 and 122: MORE MARKETS, LESS GOVERNMENT in 20
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Page 131 and 132: Pramod K.Yadav Ritesh Agarwal Docto
Page 133 and 134: REIMAGINING INDIA External Commerci
Page 135 and 136: REIMAGINING INDIA bringing in chang
Page 137 and 138: Paul Conway Richard Herd Sean Dough
Page 139 and 140: REIMAGINING INDIA Figure 2. Distrib
Page 141 and 142: REIMAGINING INDIA Figure 3. Product
Page 143 and 144: REIMAGINING INDIA centralised overs
Page 145 and 146: Rok SPRUK International Economist,
Page 147 and 148: REIMAGINING INDIA Taxes, Corruption
Page 149 and 150: REIMAGINING INDIA policy enforcemen
Page 151 and 152: REIMAGINING INDIA 3 Aggregate deman
Page 153 and 154: Kalpana Kochhar, Senior Advisor, As
Page 155 and 156: REIMAGINING INDIA Table 2. India In
Page 157 and 158: REIMAGINING INDIA Table 3: India In
Page 159 and 160: REIMAGINING INDIA Figure 3. Value-A
Page 161 and 162: REIMAGINING INDIA formance more rel
Page 163 and 164: T.R.Manoharan, Senior Coordinator,
Page 165 and 166: PROGRESS WITHIN LIMITS Table-2: Cha
Page 167 and 168: Shubha Ghosh Professor of Law SMU D
Page 169: A NEW BEGINNING Brief for Petitione
Page 172 and 173: SOTTO VOCE the Directorate of Prohi
Page 174 and 175: THE OTHER PATH proper management of
Page 176 and 177: THE OTHER PATH and income poverty;
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THE OTHER PATH of manufacturing ind
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THE OTHER PATH Sr. Director HR on w
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TENANCY REFORMS brief outline of th
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TENANCY REFORMS or indefinite cesse
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TENANCY REFORMS cent in kind or cas
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THE HUMAN FACTOR THE INDIA ECONOMY
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P LANMAN TECHNOLOGIES KNOWLEDGE . I
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