Devaluation V/s Revaluation...

Article;
Road rocky for INDIA not a repeat of 1997 ASIA-Crisis.

Comment;

There is one more reason for borrowing abroad, low interest rates due to recession and the investment in emerging economies did not crowded out investment in the US. But, now, the scene is different... The money is flowing out of the emerging markets in favor of a strong currency and higher bond yields, inflation indexed bonds, too, because prices are rising slow in the US. Domestic investors (in the US) would turn to an economy like this; they would be reaping higher real returns because inflation is low. The focus of the article was growth and financing, of current account deficit, too. INDIA needs foreign exchange inflows to finance the CAD and to attract them the strategy will be to offer higher returns, both, inform of a strong (domestic) currency and/or higher interest rates this will not only increase foreign exchange inflows and will also help reduce the current account deficit due to a stronger currency, the impact would be double, we would be able to pay for imports and will pay less, too. But things have changed dramatically in the past few days… the rupee has depreciated to 68 because the FM said the rupee is undervalued... There is one more theory that says the rupee is overvalued (the REER-real effective exchange rate). The other says it is undervalued ( Big Mac Index). I do not know why we want to devalue even when there is no problem of unemployment to push exports and prices…