A strong rupee hurts the economy
A more appropriate exchange rate would stimulate exports and dampen imports, just as it would help domestic manufacturing firms to be more competitive
The exchange rate of the rupee rose to Rs63.50 per US dollar last week, attaining a two-year high, while foreign exchange reserves were at a record level of $393 billion. It has led some financial analysts to predict that the rate might climb down to Rs60 per dollar by end-2017. This might be a source of joy and pride for a few. But if our object is to stimulate investment, create employment and foster growth, it is a cause for serious concern.
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