Business | Economy
Dollar reserves a problem for India
Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion (Dh971.7 billion) foreign-exchange reserves and hold fewer dollars.
- Bloomberg
- Published: 23:04 July 4, 2009
Aix en Provence: Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion (Dh971.7 billion) foreign-exchange reserves and hold fewer dollars.
"The major part of Indian reserves are in dollars - that is something that's a problem for us," Tendulkar, chairman of the Prime Minister's Economic Advisory Council, said in an interview yesterday in Aix-en-Provence, France, where he was attending an economic conference.
Singh is preparing to join leaders from the Group of Eight (G8) industrialised nations - the US, Japan, Germany, Britain, France, Italy, Canada and Russia - at a summit in Italy next week which is due to tackle the global economy. China and Brazil will also send representatives to the summit.
As the talks have neared, China and Russia have stepped up calls for a rethink of how global currency reserves are composed and managed, underlining a power shift to emerging markets from the developed nations that spawned the financial crisis.
"There should be a system to maintain the stability of the major reserve currencies," former Chinese vice-premier Zeng Peiyan said in a speech in Beijing yesterday, highlighting China's concerns about a global financial system dominated by the dollar.
Fiscal and current-account deficits must be supervised as "your currency is likely to become my problem", said Zeng, who is now the head of a research centre under the government's top economic planning agency. The People's Bank of China said on June 26 that the International Monetary Fund (IMF) should manage more of members' reserves.
Russian President Dmitry Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the dollar's future as a global reserve currency. Russia's proposals for the Group of 20 major developed and developing nations summit in London in April included the creation of a supra-national currency.
"We will resume" talks on the supra-national currency proposal at the G-8 summit in L'Aquila on July 8-10, Medvedev aide Sergei Prikhodko told reporters in Moscow on Friday.
Singh's adviser Tendulkar said that big dollar holders face a "prisoner's dilemma" in terms of managing their holdings. "That's why I'm telling them to do this."
He also said that world currencies need to adjust to help unwind trade imbalances that have contributed to the global financial crisis.
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