The rupee confronts an external shock: for the optimal response, here’s what policymakers should do
India’s forex reserves are not useful if hydrocarbon supply is the constraint. We must continue the present policy and let the rupee find its market level. However, we do not think that India will gain much because of the rupee’s depreciation. True, exporters will gain in rupee terms in the short-term, but our export volumes are unlikely to expand. Exports with high import content, for example, will see costs rise, which will limit the price edge in export markets.
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