Fiscal discipline is the key’

Hyderabad, August 14: Former Reserve Bank of India governor Y Venugopal Reddy said the extent of globalisation would have to be limited if there was no global currency.

‘’If globalisation is to be successful and sustained, every country must ensure fiscal discipline,’’ he observed pointing out at the bankruptcy of Greece in Europe due to increased sovereign debt. He delivered a lecture on ‘UN Commission on Global crisis: Working and Recommendations’ in memory of Dr Waheeduddin Khan, the founder- director of the Centre for Economic and Social Studies (CESS) here today. Recalling his association with Dr. Khan, Reddy termed him as a highly respected scholar. ‘’To be frank I offered to give the lecture,’’ he said. He opined that the report of UN Commission on global crisis which erupted in September 2008, was most comprehensive and objective account of the crisis and its study would be of interest to academicians and policy-makers.

‘’The inherent problem with a national currency operating as an international reserve currency, citing US $, is the extent of liquidity required for the global economy may not always be equal to the extent of liquidity that is generated by a national currency for use in the global economy,’’ he averred citing the commission report.

‘’Further if the global demand for such reserves increases significantly, and the US supplies such currency in abundance, its dollar is under threat since supply of such reserves amounts to increase in external liabilities of the country,’’ he said and added that the commission had called for a new International Currency Certificates to address the problem.

As for regulation of financial institutions, he said, regulations are necessary to protect consumers and investors. ‘’However, countries going for soft regulations in a bid to attract economic activity shouldn’t be permitted,’’ he observed.

Stating that public policies in tackling the crisis were praise-worthy, Reddy opined that the outlook for global recovery was still unclear.

CESS, Hyderabad director Prof. Panda proposed a vote of thanks. On the occasion, CESS chairman Prof. Krishna said that it was instituting a gold medal for best Ph.D thesis in memory of Waheeduddin Khan and appealed to those who knew him to send contributions to the corpus fund being set up for the purpose.