Mr.P. Chidambaram has once again revived the idea of full convertibility of the Rupee in his second innings as Finance Minister under the UPA dispensation. The second Tarapore Committee is reported to have recommended a road map with milestones for full convertibility of the Rupee by the year 2011. Vested interests in the global financial sector are gungho over the Tarapore Committee.
It is a coincidence that it was Chidambaram who in his first innings as FM floated the idea of convertibility and got the RBI to appoint the first Tarapore Committee on Rupee float in the year 1996. The Committee has then recommended a 3-year road map for full convertibility. But the tsunami of the East Asian crisis destroyed the credibility of the concept of full convertibility as a desirable financial architecture and all talks of full convertibility ended. Even the IMF and World Bank, which had commended full convertibility as a wide system of exchange management, gave up their conviction in such model and even began to praise the Indian moderation in exchange management as an illustrative example for other developing nations. Malaysia gave up full convertibility and explicitly copied the Indian model and escaped IMF and World Bank package and the debt burden it imposed. The US Treasury Secretary John Snow openly praised the exchange management policies of India. In the circumstances, it is all not clear as to what drives the present effort towards full float of the Rupee?mysteriously again when Chidambaram is the steward of the Finance Ministry.
The SJM regards the move of the government towards full float of the Rupee as ill-conceived and dangerous. The Indian government should not as a matter of fact shift to full currency float, which will be a grave risk for the economy on the rise, a rethink on the present global financial architecture based on speculation-driven full convertibility. The SJM appeals to all political parties to put pressure on the government to shelve the move towards full convertibility. The SJM will organise an enlightened opposition and resistance to the dangerous move, which can hit the Indian economy like the East Asian, Russian, Yugoslavian, ERM, Mexican and South American financial crisis?all arising because of essentially full currency float.
(Muralidhar Rao is National Convenor, Swadeshi Jagaran Manch.)