Date:30/01/2006 URL: http://www.thehindubusinessline.com/2006/01/30/stories/2006013000840801.htm

Back Reserve management

This refers to the article, "Lessons from China's reserve management," (Business Line, January 23). Forex reserves today are 18 per cent of our GDP.

As the author points out, we are sitting on a big risk on our dollar reserves. At present, national external debt is about $115 billion and it is mostly on account of the private sector.

Even though our trade deficit and current account deficit (CAD) is increasing, it is manageable and it is good to have a CAD for a diversified economy such as ours.

Added to this we have a comfortable balance of payment position.

RBI not only needs to be transparent and accountable, it also needs to have the expertise to manage the big reserves.

The author has asked the right questions and we expect the RBI to clarify the issues and also put right steps to manage the reserves.

Venkatesh S. Bijoor

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