Indian Rupee operates under a managed floating exchange rate regime where market forces determine its value, but the RBI intervenes to ensure macroeconomic stability and prevent excessive volatility.
INR value depends on:
• Demand for exports
• Capital inflows (FDI/FPI)
• Oil imports (major factor for India)
• Interest rate differentials
Why India Does NOT Prefer Free Float
• High import dependence (especially crude oil)
• Vulnerability to capital flight
• Need to control inflation (imported inflation)
• Protect domestic economy from global shocks
Exchange Rate – Committees
• Rangarajan Committee (1991) —> Market-determined exchange rate
• Tarapore Committee (1997, 2006) —> Capital Account Convertibility (phased)
• Sodhani Committee (1995) —> Forex market development
#CA2026
#ECONOMY
INR value depends on:
• Demand for exports
• Capital inflows (FDI/FPI)
• Oil imports (major factor for India)
• Interest rate differentials
Why India Does NOT Prefer Free Float
• High import dependence (especially crude oil)
• Vulnerability to capital flight
• Need to control inflation (imported inflation)
• Protect domestic economy from global shocks
Exchange Rate – Committees
• Rangarajan Committee (1991) —> Market-determined exchange rate
• Tarapore Committee (1997, 2006) —> Capital Account Convertibility (phased)
• Sodhani Committee (1995) —> Forex market development
#CA2026
#ECONOMY
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