Well many analysts had termed the slide as temporary as there were not many volatile shocks being experienced in the Indian economy. Economically and politically the climate is favourable and the present government is determined to achieve a higher than eight per cent GDP growth. With forex reserves in the $40 billion range and exports touching 15 per cent and industrial production up 12 per cent, it seems that any downward movement in the Rupee value would be only of a temporary nature. But it will be for the Reserve Bank of India (RBI) and finance ministry to determine what level they would be comfortable with.

The current budget has put forth a series of measures to attract foreign investments by opening more avenues to foreign investor entry. But, much more is required. If Rupee stability has to be maintained the government will have to first clear off its fiscal mess, trade policies will have to be further liberalised and exporters will have to be given a promotional boost so as to bring in the much required exchange which presently exporters are holding back overseas.

Most of the South East Asian currencies have appreciated and Indian exporters will not miss a golden opportunity to make a fast buck once Rupee slides. But RBI is aware of this and will nip the bud at the earliest. Many have predicted that there will be a 5-7 per cent depreciation in the future and no one sees any form of appreciation. Expectations are that the Rupee will trade at around Rs 44. 50 - 45 per dollar by December-end.

For the Rupee to become capital account convertible a lot of homework will have to be done and unless and until the fiscal, financial and legal framework is in place, it is too early for India to take the leap.

A hasty jump would only worsen the present situation and speculative attack on Rupee would make the fiscal situation even more grim. India should learn a lesson from the South Asian crisis and if in future it wants to become a world player it would have to first build up the necessary infrastructure and change the mindset. Only then will it be able to cope with the huge volume of inflows and outflows which at the present juncture it is not able to handlie.

For India to integrate with the world markets, RBI will have to loosen its reins gradually so that the country becomes an open economy in the true sense.

With more foreign investors showing interests in the Indian economy, the government will have to carefully monitor the long run external value of the Rupee. This, because trading volumes will increase as more and more bilateral treaties and trade agreements will see higher volumes of Rupee being exchanged in the market.