Nobel Prize winner Joseph Stiglitz commented that India should take appropriate measures to curb the inflow of short term investments in the form of US dollars. This loosely controlled inflow of US dollars into the Indian market is with the purpose of investing and reaping gains inherited from the prospects of developing countries such as India. Stiglitz stated that since most of the investments are short term in nature, they do not in any manner contribute to the rise in employement rates of the country. Also, since they are can be withdrawn on a short notice, he said that possibility of a sudden withdrawal cannot be discredited. Stiglitz went on to remind that the economic crisis of 1990 was mainly brought on by the unexpected withdrawal of investments by short term investors.
Indias Economic Advisory Council, headed by C. Rangarajan has stated that India can withstand an inflow of investments of up to $7000 crores, judging by the current market standards. There is a prominent rise in the inflow of funds and investments from abroad to the Indian share and debenture market. An investment of $7000 crores can work to null the trade deficit in India amounting to around $5000 crore dollars. The remaining money from foreign investments can be set aside as a reserve, he said. The recent unexpected surge in the flow of investments to India can be traced to the financial bail-out package proclaimed by America.
It has to be noted that many countries including China have obstructed excess inflow of investments into their economy stating that this may lead to a tilt in the economic balance in the country. Currently, with China rising to a superpower status, and India on its heels as a close competitor, it is crucial that the Government of India takes some time out to ponder over the words of the great mind that Joseph Stiglitz is.
Short term Investments: India’s economy all set to crash land? Possible, says Nobel winner Stiglitz