Exports are stagnating, and if the attempts to resuscitate theeconomy do bear fruit, imports will increase. On the other hand, foreign inflows are likely to be lower. These are the worries behind the recent decline in the value of the rupee.

The RBI has said that the rupee has overshot its value according to its real effective exchange rate calculations. But these are based on the trade weights of five currencies, while, according to the 36 currency REER series, there is enough scope for the rupee to depreciate further. But such arguments are of little value. While there is no doubt that speculation must be discouraged, we feel that what the country needs at the moment is economic growth, and an orderly depreciation of the currency is a small price to pay.