In “Till the music stops...” (October 4), A V Rajwade’s views are commendable, but his concerns about an appreciating rupee appear misplaced. Precisely because the current account deficit is soaring, our import bill should come down so an appreciating rupee would help save import costs without actually cutting down on import quantities. Lower import costs will also have a multiplier effect on the economy, eventually leading to lower inflation. Incidentally, there were no serious complaints from exporters earlier when the dollar-rupee exchange rates were at 40 levels since the overall reduction in costs helped exporters of manufactured goods retain their operating margins.
Rajwade has been consistently pleading for RBI intervention to prevent the rupee from appreciating, which is inconsistent with our free markets. RBI is right in intervening in the markets only to control high volatility, without targeting a specific exchange rate. Otherwise we would not be all that different from China whose exchange rate policy has been the cause of many internal and external imbalances.
C Chandrasekhar, Mumbai
