Ajit Ranade: Why India shouldn’t abandon capital gains tax for the sake of the rupee
When portfolio investors withdraw and other inflows prove inadequate, the rupee faces pressure. Expensive imported oil compounds the problem. Persistent inflation above trading partners’ levels can weaken the currency over time. Additionally fiscal expansion, which raises demand without corresponding supplies, can increase imports and inflation. Investors assess these conditions alongside the credibility and predictability of policy. Rupee pressure, thus, has multiple causes.
