Best of BS Opinion: Should RBI cut its intervention in currency markets?

Business Standard

26-05-2025

Hello and welcome to BS Views, our daily wrap of the editorial page.
The Reserve Bank of India has been generating higher surplus on account of, among other things, higher interest income and foreign exchange gains. Our lead editorial notes that higher surplus transfer to the government will help ease liquidity conditions, which, at the time of monetary policy easing, help transmission. Additionally, the RBI perhaps doesn't need to intervene excessively in the foreign exchange market. While a stable currency has its merits, excessive intervention by the central bank can weaken incentive in the private sector to hedge its exposure, besides leading to overvaluation. It can also push the private sector to raise money from overseas sources, increasing the burden on the central bank to intervene. This cycle must be avoided. The central bank can intervene at times of excess volatility, but in the normal course, it should allow the private sector to handle it.
Our second editorial points out that today's Kolkata port is a logistical nightmare, partly due to the its geomorphological characteristics. Given the lack of a deep draught there, as well as at Haldia port further south, large ocean-going container ships cannot navigate up. Such a situation cannot be allowed to continue indefinitely, given that the geopolitical situation has turned adverse. A deep-sea port that allows container ships to arrive without lightening, and which connects seamlessly with road and especially rail, must be a priority. Investment will certainly be needed, but the higher priority is political will and clarity.
Payments is an important industry of the modern world, one that is primarily a technology business, not a financial business. Our lead columnist Ajay Shah writes on how 'agency architecture' can be used to reshape the payments industry in India, pointing out changes at the Reserve Bank of India. The first solution in redefining the payments universe is in clarifying the core activities of regulation, while the second lies in governance arrangements. A specialised board to govern the work of payments regulation within the RBI would help. Last week's Gazette notification does that, creating a path for three independent directors to join three RBI employees on a board for payments regulation. Given the absence of these sections of law in the extant legislation, the role of the Payments Regulatory Board will have to evolve through good sense and norms.
In today's second column, Surinder Sud points out that India is the second-largest global producer of fruit and vegetables after China, and even leads in several important items. In fact, horticulture has emerged as one of the key growth engines of Indian agriculture. Horticultural crops are also typically more productive and remunerative than food crops. However, wastage ranges from 15 per cent to as high as 40 per cent, and is largely because of a deficit in produce-management infrastructure. Exporters, too, face several challenges, including non-tariff trade barriers, such as arbitrarily fixed food-safety standards and stringent sanitary and phytosanitary norms. Such issues need to be addressed to sustain and boost this sunrise sector.
Tim Wu reviews two books that consider the challenges with artificial intelligence, as well as its advocates, primarily Sam Altman of OpenAI. The reviewer posits that the AI industry may be facing a 'paper clip' problem, one in which both the product and producers are fixated on a solution that edges out all other activity. In 'Empire of AI', Karen Hao argues that the pursuit of an artificial superintelligence has become its own figurative paper clip factory, while 'The Optimist', by Keach Hagey, posits that the seemingly innocuous paper clip maker who ends up running the world for his own ends could be Altman himself. Wu points out that if the aim is not to help the world, but instead to just get bigger and better, then our problems around AI might just get bigger too.