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Growing regional disparities are a real and present danger to Indian growth and poverty reduction, and to Indian politics. The specifics of regional policies can be debated, but
The increasing gaps between the per capita income and consumption expenditure in urban and rural areas are major areas of concern in the strategy of inclusive growth, currently being followed in India. The ongoing financial turmoil since 2007 calls for global financial reforms. The focus of these reforms should be on making transparent rules which encourage trade, growth and commerce. A few of these reforms may include changing the global exchange rate system, monitoring the fiscal and current account deficit of countries, overhauling the banking system, taxing of capital flows and reforming the IMF and the World Bank. Currency mismatches have devastated corporate balance sheets in many countries, and thus precipitated macroeconomic crises. How can these be avoided? The Indian evidence shows that an elaborate system of capital controls did not prevent firms from taking on unhedged currency exposure when they desired it. A macroeconomic environment with a flexible exchange rate is the key to reshaping the incentives of firms and thus avoiding crisis. Arguing that the pegging of the renminbi to the dollar hurts the entire world, some analysts have called for the emerging-market economies to join the | ||
