Forex Dilemma!!

Forex Dilemma!!
As I go on record today, 22/10/2005 - India's forex reserves have crossed well over USD 143 Billion. Yet Indian Rupee is weakening against the US Dollar and hit a low of Rs 45.15 to one USD recently.

What's happening?
Why are those handling the Forex - Finance Ministry, RBI etc are keeping quiet?

It is a loss to the nation and its people. On one side you are funding the US with interest free dollar ( to the level of dollar reserves - guess USD 100 Billion) by way of holding reserves and on the other side you continue to borrow and or service interest for borrowings from the World Bank / IMF etc at rates as high as 7 percent. All this money by way of interest
is out of sheer hard work of the citizens of India. We are gifting the fruits of our labour to some nation who wants to bully India at every available opportunity. Be it Nuclear programme, Pakistan, Space programme , embargo on imports from India etc etc.

What use are so much Forex reserves when you can't utilise it and benefit India?
Dump as much forex in the market as required so as to buy a USD at Rs 35. You will see lots of people making big noises that our exports will be uncompetitive etc etc. I DISAGREE. Indian exports are largely import based. ie. Most exports are by way of value addition on imported raw materials and intermediatries. We have a huge import bill for OIL. To reduce the burden of
imports either we reduce the quantity of imports or value of imports. Quantity reduction is ruled out as of now. Value reduction is possible. Once the Rupee appreciates the import bill drops to that extent.Cheaper import means competitive exports leading to more exports in terms of volume and value terms in the future.

Dhakshina Moorthy, K.M.
22/10/2005.