would be poorer and in the short run there would be immense disruption. ” 11. the indian forex markets have been fairly stable in recent months. as you know, the reserve bank is mandated to maintain orderly conditions in the foreign exchange market. its intervention in the forex market is solely directed at curbing sudden turbulences not backed by the economic fundamentals. as has been said repeatedly, market operations are not intended to achieve any target exchange rate or band of rates. it must be pointed out that the exchange rate dynamics in india for more than a decade has been driven by capital flows rather than current account balances. as an aside, india has mostly run a current account deficit, notwithstanding a bilateral trade surplus with the us, marginally more than usd 20 billion during 2018. though long - term flows related to fdi and long - term debt have been fairly stable keeping in tandem with the economic fundamentals, the portfolio flows have their own dynamics depending as much on 2 / 3 bis central bankers'speeches attractiveness of returns of indian assets as the global factors determining their risk appetite. gyrations in the forex market in these circumstances leave no option other than market intervention to restore orderliness in the market. one also need to bear in mind that india ’ s forex reserves are borrowed reserves and not built out of export surplus. inasmuch as it provides a bulwark against sudden flow reversals, it enhances the country ’ s ability to cope with the fall out and indeed, contributes to global stability as well. 12. the policy regime is also oriented to providing adequate instruments of hedging to all resident economic agents who have exposure to a foreign currency as well as all non - residents who have a rupee exposure. the onshore markets are fairly deep and liquid but needs further strengthening. there is a wide menu of hedging instruments available and further expansion would be in keeping with understanding of their risk implication. in recent times, global institutions and investors have shown a healthy appetite for rupee denominated assets, which while ensuring flow of foreign exchange protects the indian issuers from exchange risk. this trend needs to be given further policy nudges. 13. in fine, i would like to say that though there are discouraging portents for the global economy and uncertainties arising from trade tensions and geopolitical developments, i am optimistic that coordinated policy response and dispute resolution within a multilateral framework will see us through the day. 14.

domestic employment and growth, there is an abhorrence for imports because the country loses employment, growth and foreign exchange. this brings in deterrent measures like tariff and when one hears talk about optimum tariff, it simply means optimum for the welfare of the country concerned not for the global welfare as a whole. and if all the trading countries impose retaliatory tariffs, it becomes a negative - sum game affecting global welfare and welfare of individual nations to a varied extent. 8. ordinarily, the exchange rate is supposed to play some kind of an equilibrating role in addressing the current account deficit, subject of course to several preconditions. a country with trade surplus should experience appreciation of its currency making its exports more expensive and imports cheaper and vice versa for a country with trade deficit. the success of this mechanism depends on to what extent the exchange rates are allowed to be determined by the market forces without intervention of national authorities. it is not surprising that allegations of currency manipulation were fairly common in the run up to the recent trade tension. 9. the increasing globalisation of trade, manufacturing, services, supply chain, capital movement, etc. has created a web of complex interdependence. moreover, the externalities of national economic policies have also become substantially magnified. while the national governments and policy makers are supposed to act in interest of their respective constituencies, the collateral effect of their action on the rest of the world can be significant. the need for coordinated action amongst the leaders of the larger nations is urgent. it must be borne in mind that such coordinated action did contribute to contain the global financial crisis. 10. speaking recently, governor das drew attention to the us treasury ’ s monitoring of countries as currency manipulators since 2015 in which india figured for some time till 2018. he further pointed out that the charter of the imf has elaborate provisions to bind its member countries not to manipulate their currencies so as to gain unfair comparative advantage in trade and it is best that the issues relating to any alleged currency manipulation are best dealt with in a multilateral framework than bilateral attempts to correct a wrong. the same logic applies to trade in goods and services and other areas of discord as well. that was the purpose behind the erstwhile gatt, now wto. the current trade tensions are best sorted out multilaterally through cooperation lest as paul krugman tweeted some time back, “ in the long run the world