The Rupee and Its Malcontents-Exchange Rate Management in India

The Rupee and Its Malcontents Exchange Rate Management in India Jayati Ghosh Abhijit Sen C P Chandrasekhar The sources of the current instability in the currency markets - portfolio capital inflows from foreign institutional investors, exporters withholding their foreign exchange earnings and reckless imports and import hunching by domestic firms are rendered the more potent because of the reduced ability of the government to intervene effectively, it having discarded many of the instruments it could earlier have used to determine the exchange rate of the rupee. Having tied its own hands so effectively, the government's external economic policy has become a prisoner of speculative forces rather than their master.