Devaluing to Prosperity, with Surjit Bhalla and Rajiv Lall


While many believe that currency undervaluation — intervention in currency markets to keep the price of the home currency cheap — has questionable impacts on development, the examples set by China, Japan, Korea and other countries suggest that devaluation could be an important determinant of prosperity. As economies struggle to emerge from the financial crisis, how can we look to systematic devaluing of currencies as a strategy to boost growth? How does this interact with other monetary and fiscal policy measures, and what are its impacts on financial institutions and industry?

Surjit S. Bhalla is Chairman of Oxus Research and  Investments. He has worked at the Rand Corporation, Brookings Institution, the World Bank, Goldman Sachs and Deutsche Bank. He is author of several books, including Imagine There's No Country: Poverty, Inequality, and Growth in the Era of Globalization. He has been a member of several government of India committees on economic policy, including the committee on capital account convertibility.

Rajiv Lall is Vice Chairman and Managing Director of Infrastructure Development Finance Company (IDFC). He served as a Partner with Warburg Pincus and as Executive Director and Head of Asian Economic Research with Morgan Stanley Asia Limited. Before this, he has worked with the World Bank in Washington, DC on policy issues confronting the Chinese economy, lending strategy, and macroeconomic and trade policy issues. He has also worked with the Asian Development Bank (ADB) in areas such as feasibility analysis of infrastructure and energy projects and approaches to public private partnership in infrastructure development.

Uday Kotak is the Executive Vice-Chairman and Managing Director of Kotak Mahindra Bank, in addition to being its principal founder and promoter. He is a member of the Government of India’s High Level Committee on Financing Infrastructure, the Primary Market Advisory Committee of the Securities & Exchange Board of India, Member of the Board of Governors of the National Institute of Securities Markets, National Council of CII, and Board of Governors of ICRIER. He is also the Chairman of the CII Capital Markets Committee.

Devaluing to Prosperity: Misaligned Currencies and Their Growth Consequences examines the veracity of various propositions relating to currency misalignments and their effect on policy. The author subjects more than a century of global exchange rate management and growth outcomes to rigorous empirical analysis and argues that a country can systematically devalue and yet prosper. He argues that currency undervaluation has been the most important determinant of growth; more important than other growth determinants like "Western institutions." When currency undervaluation is large, and accompanied by current account surpluses, the policy is akin to mercantilism. And when large economies indulge in such undervaluation, currency wars are a likely outcome. The analysis helps in interpreting several phenomena, especially for the last three decades, which have witnessed high economic growth in developing countries, a widening of global imbalances, and a sharp increase in reserve accumulation, particularly among high-growth Asian economies. The book argues that these events are strongly linked via a consistent policy of currency undervaluation in Asian economies.

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This programme is part of our BusinessAsia series, which highlights new developments and best practices in the corporate and economic world that bolster notions of corporate citizenship, including engaged leadership, innovation, and corporate social responsibility. Recent programmes under this series include a discussion on the opportunity presented by the growing consumer markets of India and China, and a panel on how industry can collaborate to drive regional dominance.

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Event Details

Wed 19 Dec 2012
6:30 PM - 8:30 PM
Lotus Room, Trident Hotel, Nariman Point, Mumbai
RSVP required: please email (priority will be given to Asia Society members)
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