ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Exchange Rate Appreciation: A Major Policy Reversal

There has been a sharp appreciation in the value of the rupee against the dollar in recent weeks, a change in policy track from the tightrope walk of promoting export competitiveness while holding the cost of imports. This policy change, occasioned by the continuing upsurge in capital inflows, is intended to combat inflation but it is cause for worry since any major appreciation in the value of the rupee will have a direct impact on export growth and therefore on the current account deficit as well. It will, at the same time, not help fight inflation, since prices are rising due to domestic supply shortages and growing liquidity.

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