Indian exports likely to lose edge on rising rupee, says RBI study

Study suggests absorbing inflows to avoid this; effective exchange rate index revamped

Indian exports risk losing competitiveness as large capital inflows can cause the rupee to appreciate, says a Reserve Bank of India (RBI) study. Absorbing the inflows through current account deficit and mopping them up as foreign exchange (forex) reserves can help avoid such a situation. The rupee settled at a near five-month high of 72.99 against the US dollar on Thursday after adding 6 paise, strengthening for the third day in a row.

India saw massive foreign capital inflows last year, mainly driven by the huge liquidity in global markets. Central banks have adopted ultra-lose monetary policies to battle the