Why rupee is likely to fall more even as exports lose competitiveness
A contractionary fiscal stance after pandemic-induced expansion would need a combination of tax revenue increase as well as expenditure rationalisation.
Synopsis
RBI’s stated objective of avoiding currency volatility derives from India’s dependence on energy and fertiliser imports. It has been dipping into foreign exchange reserves to shore up the rupee so that the fuel import bill does not balloon. Tracking trade fundamentals, the rupee has more declines awaiting it.
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