We emphasized how this change cost the economy, resulting in an uncompetitive exchange rate and lost exports, overly tight liquidity at a time of decelerating growth, and heightened risks of speculative attacks. This begs an important question: Why did the RBI change policy?
The RBI must come out with an official explanation, but until it does, we can only guess. But there are a few reasonable hypotheses.
One common explanation is that it happened accidentally. That is to say, the RBI never meant to peg the exchange rate. Its real objective was to rebuild reserves after the country's foreign exchange cushion had been eroded in the middle of 2022. So, when capital started to flow into the country again, attracted by India's post-pandemic resurgence, the Central bank decided to buy up the dollars rather than allow the rupee to appreciate.
There is clearly something to this hypothesis, as the RBI has often preferred to build reserves rather than allow appreciation. But the explanation is surely incomplete. For a start, it does not explain why the RBI has since 2022 intervened repeatedly on both sides of the market, not just to prevent appreciation but also to forestall depreciation. Nor does it explain why the RBI fought so hard to preserve the peg when depreciation pressures arose in late 2024, even at the cost of expending sizeable amounts of the country's hard-won reserves.
A second hypothesis is that the RBI was focused on combatting inflation, and worried that a depreciation would undermine their efforts. It is true that inflation remained above the 6 per cent limit for some time after the
هذه القصة مأخوذة من طبعة January 16, 2025 من Business Standard.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك ? تسجيل الدخول
هذه القصة مأخوذة من طبعة January 16, 2025 من Business Standard.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك? تسجيل الدخول
Focus should be on smart talent, not labour arbitrage
Amid debate over a 90-hour work week, serial investor and upGrad Chairperson RONNIE SCREWVALA argues that both companies and countries are now seeking the brightest minds, rather than simply relying on labour arbitrage. Screwvala, who was in Davos last week for the World Economic Forum (WEF) annual meeting, tells Peerzada Abrar in an online interview that India has a huge opportunity to position itself as one of the world's most innovative nations by focusing on developing its talent pool in areas like artificial intelligence (AI) and emerging technologies. Edited excerpts:
Global Majors to Power TN's ₹42K Cr Green Hydrogen Hub
Four global majors — Malaysian government-owned oil and gas giant Petronas-backed Amplus Ganges Solar, Singapore's state-run energy firm Sembcorp Industries' Green Infra Renewable Energy, Gurugram-based Acme Green Hydrogen and Chemicals, and ReNew Energy's subsidiary ReNew E-Fuels — are set to propel India's green hydrogen ambitions in South India.
Fault lines of fear threaten to fracture market's fragile core
Seismic shifts in sentiment call for a sell-on-rise approach: Analysts
If margins come under pressure, there may be delays in some projects
India's largest steel producer JSW Steel plans to continue with its ₹65,000 crore capex within timeline if margins are supportive. In an audio interview, company's Joint Managing Director and Chief Executive Officer JAYANT ACHARYA tells Ishita Ayan Dutt that the steel industry expects the government to take safeguard measures to curb dumping after Budget. \"A level playing field is very critical,\" he emphasizes. Edited excerpts:
Will speak to Putin soon: US prez
US President Donald Trump has said that he would soon speak to his Russian counterpart Vladimir Putin and help in settling the war in Ukraine.
Opportunity, risks for India in Quad's Trump card to counter China
Grouping's first meeting under new US President reaffirms its commitment to Indo-Pacific security, though experts flag concerns, writes BHASWAR KUMAR
Toyota's tech, Suzuki's consumer expertise driving alliance in India
Two companies have identified fossil fuel reduction as common objective: TKM's Maru
India emerges as Japanese Manga's latest 'superhero'
Investments in Japanese-style comic books and graphic novel content, famously known as Manga, will see more interest from the Indian media and entertainment industry.
A sagging India story
Overenthusiasm about India was so 2024. The Budget's task is to revive flagging momentum
Devil is in the details
Runaway growth in retail credit and the related stress in the business call for an urgent need to educate and protect consumers, reports RAGHU MOHAN