Friday, January 04, 2008

Insights from street children

A brief pause (or an interminable wait during peak hours) at a traffic light is a sure invitation to beggars and vendors in Indian cities. But this editorial from the Economist seem to have spun an insightful theory – how to contain the huge forex inflows into India – based on it. Excerpts -

“INDIA, it is fair to say, is not yet reconciled to the new-found strength of its currency. One poor wretch, pressed against the car window at a Delhi traffic light, tries to change a dollar bill she presumably cadged off a tourist. She wants 50 rupees for it. Alas, the dollar now fetches less than 40 rupees.

This vigour is due to a strong inflow of foreign capital, some of it enticed by India's promise, the rest disillusioned by the rich world's financial troubles. The net inflow amounted to almost $45 billion in the year to March, compared with $23.4 billion a year earlier.

The migration of capital from the rich world to the poorer one is a sign of a bleaker season to come in the world's biggest markets. This would, then, seem an inauspicious moment for India to bet its future on export-led growth. If it cannot resist the inflow of foreign capital, it should try instead to make room for it—by observing fiscal restraint—and to make the most of it—by investing it wisely. India may then have an economy worthy of a more expensive rupee; and its children may have better things to do than hang around at traffic lights trying to change a buck.”

Well said, The Economist…

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