Tie-up rupees with dollars...

Article;
Rupee may fall further as US economy improves

Comment;

Indian currency is depreciating because of out pour of dollars and investment from the economy and, the central bank can not loose monetary policy since it will further depreciate the currency. Our major concern is CAD and imported inflation because of oil which can improve only if, either currency becomes strong, or imports go down. But the Indian currency is depreciating and the RBI can not cut interest rates. We are in a paradox… We can not loose monetary policy and we too can not increase interest rates so that less money supply makes the Indian currency strong because Indian Businesses have already stalled investment due to high interest rates. The prompt reply of a depreciating currency is to increase supply of dollar by the central bank, but, here again; it can not help much since we are already short of dollars. But in this situation if the RBI demands more dollars it will put more pressure on the rupee to depreciate and dollar to appreciate, and, we need to increase the demand for the Indian-rupee so that it can appreciate with the demand and go strong. We need both a strong rupee and a good foreign currency reserve which can be achieved if we increase demand for Indian rupee. Demand for Indian-Rupee will help us improve foreign exchange reserves because people will buy the Indian unit with dollars to buy Indian-exports. India needs to tie-up the demand for Indian-Rupee with the demand for dollars. Let people buy the Indian-Currency with the dollars…