June 22, 1998

The RBI has done well by doing precious little to check the fall

Since a strong currency is said to symbolise a country's economic machismo, there is widespread consternation at the 7 per cent fall in the value of the Indian rupee since April. Apart from affluent holidayers who are angry at having to pay that much extra for their overseas trips, politicians have seized on the depreciating rupee to score political points. There are even wild conspiracy theories linking the sliding rupee to President Bill Clinton's anti-nuclear sanctions. The RBI has demonstrated considerable maturity by not succumbing to knee-jerk rescue plans. Despite pressure, the central bank has refrained from squandering the country's impressive foreign exchange reserves -- estimated at $28.8 billion -- on bolstering the rupee artificially. It has taken a pragmatic view that a correction in the rupee's value is overdue after the South-east Asian currency crisis. Consequently, the RBI's role has been confined to tinkering at the margins.

This is exactly as it should be. While the RBI has a responsibility to prevent wild speculative currency swings, its primary obligation is to ensure that domestic interest rates are in tune with broader growth objectives. This is how the Federal Reserve in the US and the Bank of England conduct themselves. It is the market -- not always perfect, but not as prone to irrationality as many allege -- that inevitably finds a realistic exchange rate for any currency. If the US dollar and the British pound are strong currencies today, it is because the economic fundamentals in their countries have never been better. Likewise, if the yen is faltering, it is because the Japanese economy is not in the pink of health. The state of the rupee is a mirror to the state of the Indian economy. Rather than pump steroids into the monetary system and project an illusion of strength, the Government should single-mindedly focus on those larger shortcomings that jeopardise economic growth. Once these are taken care of, the rupee will also become a proud symbol of a robust economy.

Uphaar's True Tragedy

A year after the fire, India remains the land where irresponsibility is never punished

On Friday, June 13, 1997, 57 people died in a fire at Delhi's Uphaar cinema hall. Today, the tragedy is no more than a statistical memory. No lessons have been learnt. Fire safety measures are still farcical. The bureaucrat-builder nexus continues to flourish. The prosecution of those guilty for the Uphaar conflagration is progressing at a pace which would make a snail feel like a sprinter. After initially exchanging charges -- the fire service, electricity authority, municipal corporation and police took turns in blaming each other -- the establishment has simply closed ranks and is back to business as usual. Ad hoc fire safety certificates are still issued, generally for the for the love of money rather than the rules. Immediately after the Uphaar deaths, the Delhi Vidyut Board promised to install the relatively safe "dry transformers" all over the city. These haven't even been bought yet.

One of the great, if sometimes exasperating, gifts of Indians is their ability to rationalise anything. So after every disaster India just shrugs its collective shoulder and moves on -- unchanged, unrepentant. Lack of accountability has become conventional wisdom. A tardy legal process -- in the Uphaar case, there are allegations that the CBI actually delayed matters by raising technical objections -- and the conversion of the public utility network into a protection racket are both the symptom and the disease. Since no tragedy results in quick and effective punishment, the Uphaar example continues to be replicated. The issue therefore goes beyond punishing those who, albeit indirectly, murdered 57 cineastes one year ago. The essential point India has to come to terms with is: a society which sees human life as such an inexpensive commodity is only shortchanging its future.

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