India's central bank will announce steps aimed at allowing the rupee to become fully convertible against other currencies in the next "few days," Finance Minister P. Chidambaram said yesterday.
"We had discussions on it earlier with" the Reserve Bank of India, the finance minister said.
"We pulled it out of the budget, as it would have overshadowed everything else," he said.
India's Prime Minister Manmohan Singh said on March 18 his government would consider allowing the rupee to trade freely against other currencies, helping to boost overseas investments in the country.
India's currency is only partially convertible, meaning that while the market takes care of most trade-related transactions, investments flowing in and out of India -- also known as capital account transactions -- are subject to restrictions and approval by the central bank.
Singh said such moves would also help India realize its aim to make its business capital, Mumbai, a financial hub in Asia.
Bankers have welcomed the initiative.
"It's a good move and this is the right time to do it since the external sector is quite strong now," said Sanjay Nayar, chief executive at the Indian arm of Citigroup Inc.
India officially fixed the exchange rate until 1991, when it made the first move to allow the market determine the rupee's value in relation to other currencies for select transactions.
Restrictions on most trade-related transactions and remittances were lifted in the following years.
Transactions in some capital assets have also been freed from the central bank's control, but a complete rupee free-float was delayed, fearing the country could face a crisis like the East Asian currency turmoil of 1997. That crisis devalued currencies of many countries, wrecked growth and left thousands of people unemployed.
But India's rising foreign exchange reserves, which now total US$144 billion, and a strong rupee appear to have contributed to the government's latest liberal stance.
Many institutional investors are transferring savings to India because of higher interest rates and a booming stock market, and rising exports have brought in more US dollars and other foreign currencies.
The Indian rupee has appreciated nearly one and half percent against the US dollar so far this year.
Full convertibility will help companies as well, said S. Ramadorai, chief executive officer of Tata Consultancy Services Ltd, India's biggest software company.
"Investments will become easier and delays in foreign-exchange transactions will be reduced," Ramadorai said yesterday.
"It will swell momentum for growth. Investments will become easier because companies are growing through organic and inorganic" methods, Ramadorai said.
The finance minister said the budget for the next fiscal year starting April 1 laid emphasis on manufacturing as part of the government's aim to boost economic growth. He said special attention has also been given to agriculture in the budget, which was presented on Feb. 28.
The fiscal 2007 budget "bets on growth," Chidambaram said.
He expects the gross domestic product growth in fiscal 2007 similar to the last few years.
India expects its economy to grow 8.1 percent in the year ending March 31 following a 7.5 percent gain in the year ended March 31 last year. The government is aiming for 10 percent growth in the next two to three years.
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
INSPIRING: Taiwan has been a model in the Asia-Pacific region with its democratic transition, free and fair elections and open society, the vice president-elect said Taiwan can play a leadership role in the Asia-Pacific region, vice president-elect Hsiao Bi-khim (蕭美琴) told a forum in Taipei yesterday, highlighting the nation’s resilience in the face of geopolitical challenges. “Not only can Taiwan help, but Taiwan can lead ... not only can Taiwan play a leadership role, but Taiwan’s leadership is important to the world,” Hsiao told the annual forum hosted by the Center for Asia-Pacific Resilience and Innovation think tank. Hsiao thanked Taiwan’s international friends for their long-term support, citing the example of US President Joe Biden last month signing into law a bill to provide aid to Taiwan,
China’s intrusive and territorial claims in the Indo-Pacific region are “illegal, coercive, aggressive and deceptive,” new US Indo-Pacific Commander Admiral Samuel Paparo said on Friday, adding that he would continue working with allies and partners to keep the area free and open. Paparo made the remarks at a change-of-command ceremony at Joint Base Pearl Harbor-Hickam in Hawaii, where he took over the command from Admiral John Aquilino. “Our world faces a complex problem set in the troubling actions of the People’s Republic of China [PRC] and its rapid buildup of forces. We must be ready to answer the PRC’s increasingly intrusive and
STATE OF THE NATION: The legislature should invite the president to deliver an address every year, the TPP said, adding that Lai should also have to answer legislators’ questions The Chinese Nationalist Party (KMT) yesterday proposed inviting president-elect William Lai (賴清德) to make a historic first state of the nation address at the legislature following his inauguration on May 20. Lai is expected to face many domestic and international challenges, and should clarify his intended policies with the public’s representatives, KMT caucus secretary-general Hung Meng-kai (洪孟楷) said when making the proposal at a meeting of the legislature’s Procedure Committee. The committee voted to add the item to the agenda for Friday, along with another similar proposal put forward by the Taiwan People’s Party (TPP). The invitation is in line with Article 15-2