I would like to float this idea of a debate here -
why should we use a part of the forex reserves for infrastructure projects? (not whole of the reserves - but a certain part of it)
this could be a replacement for us instead of payign the ADB/WB for these projects hefty interest rates, we could pay the interest back to RBI itself. thats like paying back our own people for building our own country (please give me some valid points against this. I am genuinely interested to learn and debate - not blindly support one view over the other)
Gurumurthy in his speech says the amount of rupee being printed is directly related to amount of dollars coming into the RBI or into India as investment via FII - is this true? if yes - shouldnt India decide how much money needs to be printed?
Smaller economies peg their currencies against bigger economies (like the $) to create confidence among investors - this is what I have seen. why should India' currency be pegged at how much $ comes into the system? (please let me know if this is even true - I am trying to find sources for this claim by Gurumurthy).
This is the biggest myth of economics to peg a currency against another.
Economics is pure and simple supply and demand - of currency as well as the goods and services.
Simply leveraging one will toss the other - putting currency in market which do not successively drive increase in goods and services will cause inflation - the extreme example is that of Zimbabwe. The case of more money chasing lesser goods and services. Similarly higher goods and services produced without expansion of money supply increases demand for capital causing interest rates to go up ultimately strangulating the boom of goods and services into a recession or depression.
Foreign reserve is a separate story. It is simply needed to meet the foreign trade.
Juggling between the fiscal and monetary policy is the final straw in this game.
Nothing much beyond this.
Every other policy acts as promoter, that increase the catalytic activity, even though they are not catalysts by themselves.