The Hindu : Formulate strategy for effective use of forex reserves

Online edition of India's National Newspaper
Friday, Dec 26, 2003

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Formulate strategy for effective use of forex reserves - Chamber

By Our Special Correspondent

NEW DELHI DEC. 25. The rising foreign exchange reserves must be used as a window of opportunity for the Indian economy to create business confidence among investors, improve infrastructure and ensure better standing in the global economic order, according to the President, Punjab, Haryana and Delhi Chamber of Commerce and Industry, Ravi Wig. It is time that the Government formulated an effective five-pronged strategy to ensure efficient utilisation of existing forex reserves of more than $100 billion.

These reserves could be used as assets to create new markets for Indian goods and services by creating credit lines and by offering export and performance guarantees to the developing nations, Mr. Wig said.

The Government should continue with its policy of prepaying high cost foreign debt. In view of the return on reserves falling significantly short of interest on some categories of government foreign debt, an early retirement of the latter would ensure significant gains for the economy.

The massive foreign exchange reserves should be leveraged to tone up infrastructure such as roads, ports and airports so that exporters' transaction costs are brought down and also create a favourable climate for domestic private investment.

Mr. Wig said that organising aggressive marketing campaigns for Indian products in the overseas markets in tune with the global pattern was essential. India must set up professionally run trade promotion offices that help Indian exporters to effectively enter identified markets. In this context, the Government should take the opportunity of using foreign exchange reserves for India Brand Equity Fund to boost export growth.

New policy on ECB needs review

The mounting foreign exchange reserves can be effectively utilised if Indian companies are allowed to take an additional exposure abroad and create manufacturing assets. Indian companies should be allowed to acquire companies, brands and open offices abroad. Acquisition of companies, especially those supplying intermediate goods.

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