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Some may say that India’s relatively better economic moat globally is really the result of the “follower” approach (call it ‘late mover advantage’ if you will) of its fiscal and monetary policy makers to global liberalization. But some others opine that Duvvuri Subbarao and team are arguably amongst the smartest central bankers globally. An analysis of the central bank’s apparent strategy of recent, to use a depreciated Rupee to our advantage may place most of us in the latter group. The RBI follows a policy of stabilizing the Rupee around the real effective exchange rate (REER), which is the Rupee's value against a basket of six currencies of India's largest trading partners, adjusted for inflation. Until the latter part of 2008, dollar reserves were built up during periods of heavy capital inflows to prevent excessive appreciation and utilized to prevent excessive depreciation of the rupee. But the US sub-prime crisis changed the |
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US$-IN₹ Exchange Rate (Jan 2009 to Dec 2011) Source: IMF, PRiS Research
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Current Account Deficit To GDP Source: RBI, PRiS Research
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Disclaimer: PRiS does not guarantee any specific financial returns, business outcome or market performance based on its research and advisory services.
Disclaimer: PRiS does not guarantee any specific financial returns, business outcome or market performance based on its research and advisory services.