In light of the uncertainty surrounding the world economy, Arvind Panagariya has recommended the Reserve Bank of India not to let worries about the rupee surpassing ₹100 per dollar affect monetary policy decisions.
The renowned economist stated that, particularly in light of growing oil costs and geopolitical unrest in West Asia, the exchange rate should be permitted to naturally fluctuate. A declining rupee could eventually boost exports and draw in foreign investment because of increased competitiveness, according to Panagariya.
He contended that if oil shortages continue for a long time, using foreign exchange reserves to aggressively protect the rupee would not be viable. Additionally, Panagariya advised against depending too much on expensive securities like high-interest NRI deposits and bonds denominated in dollars.
Citing reduced inflation and better monetary management by the RBI, the head of the Finance Commission stated that India is in a better situation than it was in 2013. According to him, the economy is more capable of withstanding mild inflationary pressures brought on by currency devaluation.
Exchange rates should be seen pragmatically; Panagariya continued, emphasizing that “100 is simply a number” and shouldn’t act as a psychological barrier for decision-makers.
Source – The Tribune India
