like Repo and CRR by the successive RBI governors and the Finance Ministers of India. I even heard a CMIE director once saying, "It therefore shows that inflation cannot come down only by keeping high interest rate". I have argued many times here in this blog, citing how cost-push inflation is a menace and why food inflation cannot come down in the long run only due to monetary measures. I had also in the past questioned the rationale behind keeping the high interest rate inspite of falling M3 [M3 for March 1, 2013 is Rs.83820.2 billion while till September, 20, 2013, it is Rs.87949.2 Billion. Variations over Financial Year So Far: 6.1% in FY13 while it is 4.9% in FY14. Year-on-year: 13.6% in 2012 while it is 12.5% in 2013. Source: http://www.rbi.org.in]. I had also, requested the government many times (though this blog and Facebook positing) to stop inflation forecasting, for the reasons best known to all. Moreover, in India, the de facto way to measure the rupee's value is to compare it to the US dollar. But look at China's currency (the yuan) which is essentially "pegged" to the US dollar, so its exchange rate against the US dollar fluctuates very little because the Chinese government controls and fixes the exchange rate. So, the question is why is RBI showing so much brinkmanship shown in case of India? Now if we take the statistics from January 1st - September 26th, we will find that Indian Rupee has depreciated 4.26 per cent against the Brazilian real, 7.5 per cent against the Russian ruble, and actually appreciated 0.1 per cent against the Japanese yen! What a world of a difference it makes when one simply changes the currency he/she is valuing the rupee against. Hence, according to a number of experts, Indian Rupee should not be valued against only one currency (the US dollar); instead, it should be valued against a basket of currencies to get a better understanding of its true, intrinsic value.
Courtesy: The Economic Times