ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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The Fall of the Rupee: Background, Remedy and Policy

It would appear that over the past couple of years the Reserve Bank of India has moved towards a policy of a market-determined exchange rate which is in line with the Anglo-Saxon beliefs. But if the objective is growth, jobs and financial stability, we need to go back to managing the exchange rate in order to maintain the external value of the rupee around a level which would keep the current account deficit within +/- 1% of GDP. If the cost of intervention and sterilisation becomes unaffordable, the solution would be to impose controls on capital movement, rather than giving up management of the exchange rate.

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