Showing posts from September, 2015

The case for a weaker rupee

I believe there is a good case for a weaker Rupee. It is not about just following the fashion. China has devalued its currency recently, and before that Japan had done so, and there were doubts that Euro's quantitive easing was a proxy for weakening Euro. The method adopted to devalue the currencies might be different; direct intervention, bond buying or quantitive easing, but the end effect is a weak currency. India needs to evaluate the options now.  India's merchandise trade deficit has hovered constant around 180 billion dollars for around four years now. The gap is filled partly by earnings from services sector and partly through the foreign inflows. A bare reading of only current account deficit indicates that we have room for a devalued currency. If we are targeting to have better export performance, we need to go with a weaker Rupee. There might be a lag, but it should work, given international experience. Krugman has written an article in NYT  here . He talks