India, Sept. 3 -- While the 50 per cent US tariff on Indian exports is disheartening, it is crucial to view the matter in its proper perspective. Exports are important to our growth - the export-import differential is a component of the GDP, and it begets the forex so essential to pay for our imports, especially for oil, of which we import 90 per cent of our requirements. The adequacy of forex reserves is often judged by how many months of essential imports they can cover, with twelve considered optimal. However, accumulating foreign currency is not costless: conversion of foreign currency into rupees expands liquidity without a parallel rise in output, causing inflation.
In June 1991, our forex reserves dipped below $1 billion, worth just...