The dangers of an overvalued rupee

The rupee should be allowed to depreciate to its true value, to unleash the potential of export-dependent sectors

An export-led growth strategy with appropriate structural reforms, comprising liberalisation and an open economy, results in sustained productivity-led growth, as exports promote better resource allocation, efficient management, economies of scale and technology spillovers. Examples are the Asian Tigers, including China, which followed an export-led growth strategy and increased their participation in global value chains (GVC), expanding their tradable and manufacturing sectors as well as creating jobs and boosting growth.

One of the reasons, among other structural reforms, for the success of China’s export-led growth was an under-valued exchange rate that helped the country increase its share in world exports from one