We seem to be learning that currency depreciation is not always bad: Panagariya
Arvind Panagariya, chairman of the 16th Finance Commission, argues that currency depreciation can benefit the Indian economy by making exports more competitive. He suggests that the rising cost of imports is a natural market adjustment that encourages domestic manufacturing.
Why it matters
This perspective challenges traditional fears regarding a weak rupee and provides insight into the economic policy direction of India's financial leadership.
Columbia University professor and 16th Finance Commission chairman Arvind Panagariya says a weaker rupee will not just make exports competitive but will also keep the prices of finished imported goods higher. In an interview he calls for tariff cuts, doing away with quality control orders and revisiting bilateral investment treaties. Excerpts:Sitting in New York, how do you see the Indian economy evolving? What is the feedback that you're getting from colleagues and investors?The general perception of the Indian economy is very positive. My own assessment is that we will continue to grow at 7-8%. Manufacturing growth of 10% or so in the last three years gives me a lot of confidence; it is a very positive sign for the future. Inflation has remained stable, current account deficit has been very manageable.
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