Much of the east Asian growth story has come under question, but the dependence on export-led growth has not. Export-led economies have easily outperformed inward-looking ones. Without the resources generated by exports, imports of essential machinery and capital goods for development will suffer. It goes without saying that we need to do all we can to push exports.

Yet our efforts in this direction have been severely constrained by the protection afforded to the domestic market. While duty drawback, cash support and tax exemptions are supposed to neutralise this advantage, the complicated nature of many of these sops, and the associated red tape, has not helped. That is why exports surged only after the severe depreciation of the rupee since 1991, and why exports have stagnated after the concerns with exchange rate stability have led to an overvalued rupee.

The Economic Survey points out that the cumulative depreciation in the value of the rupee has been 15.7 per cent since the east Asian crisis, compared to a devaluation of 30 per cent for the baht and 73 per cent for the rupiah. In the past eight to nine weeks as dollar gained against the yen and the Asian currencies mirrored the yen move, the rupee has become increasingly overvalued. The RBI should accordingly allow the rupee to fall. This will push exports, provide protection, and, with world commodity prices at record lows, not increase inflation.