People's Democracy

Stop Implementing Tarapore Committee Recommendations

The Polit Bureau of the Communist Party of India (Marxist) issued the following statement on November 3, 2006

WHILE announcing the Mid-Term Review of Annual Policy of the Reserve Bank of India on October 31, 2006, the RBI Governor has also announced certain steps following the recommendations of the Committee on Fuller Capital Account Convertibility. These include raising the remittance limit for resident Indians from $25,000 to $50,000 per financial year, easing of norms for external commercial borrowings by banks and other entities, raising the limit on FII investments in government securities from $2 billion to $3 billion by March 2007 and enhancing the extant ceiling of overseas investment by mutual funds from $2 billion to $3 billion. 

It is a matter of serious concern that the RBI has initiated the implementation of the recommendations of the Tarapore Committee despite strong reservations expressed from several quarters. There is a strong apprehension that further liberalisation of the capital account in India would increase volatility in our financial system and make it vulnerable to capital flight and currency meltdown as was experienced in South East Asian and other developing countries not too long ago. In case of such a catastrophe the entire population would be affected through spiralling inflation and other adverse consequences. It is difficult to understand the keenness of the government in moving along this risky and adventurist course when the benefits of it, if any, would be restricted to a handful of corporates, banks and high net worth individuals. It needs to be noted that moving towards fuller capital account convertibility does not feature in the National Common Minimum Programme, which sets the policy priorities of the UPA government. 

The people of the country need to know about the risks involved in such a move. The Polit Bureau of the CPI(M) demands that the recommendations of the Tarapore Committee be debated in parliament before they are considered for implementation. It is also appropriate that the recommendations are put under rigorous scrutiny by the Standing Committee on Finance. Until such time the Reserve Bank of India should not go ahead with their implementation. (INN)