 "Indian rupee, Rupee vs dollar, Currency")
Last week’s depreciation of the rupee vis-a-vis the dollar has raised some anxiety in markets. It should not. From an economic perspective, it’s very important not to conflate a strong currency with a strong economy. Instead, measured rupee depreciation is both inevitable, and desirable, in the current macro environment.
This piece offers four reasons why:
1. Responding to fundamentals
Exchange rates are typically meant to be an economy’s “shock absorber” to external pressures or changing economic fundamentals so that other variables in the economy don’t have to undergo disruptive changes. If movements in the exchange rate can help equilibrate
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
