BOP Blues

BOP Blues IF the assessment of the Reserve Bank of India's Annual Report, 1995-96 is to be believed, the country's external sector situation has never been so good in terms of both the current trends and the prospective outlook. But the RBI is clearly over-anxious to prove the success of the government's stabilisation and structural adjustment policies. Last year, even before the ink had dried on the RBI's Annual Report proclaiming the remarkable stability of the rupee, in turn supposedly reflecting the fundamental strength of the country' s balance of payments, there was a precipitate fall in the value of the rupee. Again, when the RBI positioned itself against market intervention on the argument that the exchange rate should reflect market forces, the turbulence in the exchange market got worse and the rupee touched Rs 37,94 per dollar in early February, bringing the RBI under pressure to intervene in the market, which it did in a variety of ways, though it now claims that these were no more than "tactical interventions consistent with the fundamentals".