The Indian Rupee-US Dollar Exchange Rate: The Economic Impact of a Strengthening Currency
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"The profitability of exporters has been wiped out and constant appreciation is threatening the competitiveness of our product. If we lose the market, aggressive competitors are just sitting on the fence to occupy the market."1
- G.K. Gupta, President of the Federation of Indian Export Organizations (FIEO),2 in October 2007
"The government is concerned over the rapid appreciation of the rupee against the US dollar and the central bank may have to intervene if there is disorderly movement in the exchange rate."3
- P Chidambaram, Finance Minister of India, in September, 2007
"The objective of the exchange rate management has been to ensure that the external value of the rupee is realistic and credible as evidenced by a sustainable current account deficit and manageable foreign exchange situation. Subject to this predominant objective, the exchange rate policy is guided by the need to reduce excess volatility, prevent the emergence of destabilizing speculation activities, help maintain adequate level of reserves, and develop an orderly foreign exchange market."4
- RBI's Policy in the Foreign Exchange Market
In 2006-07, India attracted huge capital inflows in terms of foreign direct investment (FDI),6 and foreign institutional investment (FII).7 External commercial borrowings (ECB)8 and non-resident Indian (NRI) deposits and remittances also contributed to the dollar inflow.
1] "Exporters Seek Government Intervention on
Rupee Rise," www.newspstindia.com, October 1, 2007.
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