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

A+| A| A-

External Sector, Growth and the Exchange Rate

India has to acknowledge that it needs to manage the exchange rate rather than claim it should be market-determined. The rupee remains overvalued. To avoid a balance-of-payments crisis caused by the large current account deficit what is needed is depreciation of the rupee to somewhere around Rs 70+ level and the adoption of tight, defl ationary monetary and fiscal policies which would be extremely bitter.

1 Background

Over the month of June, as foreign institutional investors repatriated $7 billion (bn) of investments from the debt and equity markets, the rupee fell from 56.50 a dollar at the beginning of the month to a low of almost 60.75. At the time of writing (on 4 July), it was trading slightly above Rs 60. This article discusses how vulnerable India’s external sector is and the prospects for the exchange rate.

To read the full text Login

Get instant access

New 3 Month Subscription
to Digital Archives at

₹826for India

$50for overseas users


(-) Hide

EPW looks forward to your comments. Please note that comments are moderated as per our comments policy. They may take some time to appear. A comment, if suitable, may be selected for publication in the Letters pages of EPW.

Back to Top