What to do with $120bn of reserves?

In yet another attempt to figure out what to do with the problem of plenty, the Telegraph suggests lowering domestic interest rates.

The short point is that the interest rate differential permits arbitrage, of the non-resident Indian variety or otherwise, stimulates dollar inflows and triggers rupee appreciation. The answer lies not in declaring arbitrage illegal, although special treatment to NRIs should stop, but in removing the root of the problem — high domestic interest rates [The Telegraph]

Lower domestic interest rates also help spur investment in the economy and generate employment. Accomplishing this requires a stable government strong enough to overcome the fears of pensioners and other domestic savers who watch lowering interest rates with some fear.

One thought on “What to do with $120bn of reserves?”

  1. We may have seen the last of $120 billion foreign exchange, with Lalloo prasad and a bunch of savage commies roaming around the streets of delhi smelling blood!

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