The manufacturing industry in India, such as it is, just got a great deal more competitive in rupee terms because of the 40% depreciation over the last couple of years. That is precisely how a flexible currency ought to adjust to improve a deteriorating CAD. Beyond that, the government should focus on the enablers for manufacturing—electricity, roads, ports, telecommunication and credit—instead of sops or a prescriptive industrial policy.
Of these, electricity and credit are most important. RBI, in particular, can play a role in establishing a robust corporate bond market in India. This has fallen between the cracks at RBI and the Securities and Exchange Board of India (Sebi) and has been a costly laggard.
The most important thing to do to reduce oil imports is to eliminate oil-related subsidies. It is imperative that a proper market price be established for all petroleum products. Read More