The former RBI deputy governor also said that the Indian exchange control norms are `purposeless, counter-productive and barbaric'. Delivering the keynote address at a conference on `Risk Management in International Markets', Tarapore added that while the regime for corporates in India is being liberalised, there is discrimination against Indian joint ventures abroad and the investments in overseas markets by Indian banks and non-banking companies .

"Corporates should not look to management of exchange risks as a profit centre but should concentrate on their specific area of operation as the main generator of profits," Tarapore said. "Corporates, in managing exchange risk, should attempt to stay covered on both sides of the exchange market, that is sell their prospective receipts in the forward exchange market and also cover their future payments through forward purchases," he added.

"The forward market should be viewed as an insurance agency providing cover against losses at a pre-determined cost. Corporates should also realise that ultimately inflation rate differentials determine the future course of exchange rate and a currency with a higher inflation rate would not be able to escape the inevitable exchange rate adjustment," he added.

On the issue of the exchange control norms, Tarapore added that these norms also discriminate against the resident Indian (as an individual) putting restraints on holding of foreign assets abroad, a paranoid approach which he said "Results in the control concentrating on the minutia to the detriment of broader and more vital issues."

On the issue of capital account convertibility, he said that we have learnt the wrong lessons from the East Asian crisis. "We have virtually given up our brief interlude of a cautious move to CAC and take great comfort in the cocoon of exchange controls. However, the biggest impediment to a move towards CAC was the domestic financial sector which is in shambles," he added.