If India has to attain a high GDP growth of around 8 per cent and exports of 20 per cent what should be the ideal Rupee level ?
There is no such thing as the ideal Rupee level as a prerequisite for attaining a certain level of GDP and export growth. GDP growth depends largely on the productive investment of resources.

Similarly export growth depends upon competitive pricing (on which exchange rate has a bearing). But moreso on product quality, product innovation, diversification of product range and markets.

Even at a stronger level of the Rupee exchange rate a high export performance was recorded in the past.

In fact, economic fundamentals have a bearing on the exchange rate. At least in the medium to long time horizon, if not in the short-term.

What in your opinion are the prerequisites for Rupee to become fully convertible. And when do you think this will be possible?
The Indian Rupee is already fully convertible on current account and partly convertible on capital account. Prerequisites for full Rupee convertibility on capital account have been enunciated in detail in the Tarapore Committee Report on CAC with its road map. CAC has been looming on the horizon for sometime now though the exact timing cannot be predicted.

I believe over a period time this will be achieved and the present indications towards this are positive. However, it is necessary to trade warily in this regard. The experience of many emerging economies which have embraced convertibility rather hastily is cautionary rather than inspirational.

If Rupee becomes fully convertible will there be devaluation or an upvaluation?
It is not possible to prognosticate the Rupee’s behaviour on full convertibility. It will depend on a constellation of myriad factors which cannot be foreseen at this point in time.

Will entry of the euro have any significant impact on the India forex market. Will it affect the Rupee value?
Euro is just another currency. By now it has depreciated against the USD by about 25 per cent since its launch in January 1999. The exchange rate of the euro has no material bearing on India’s trade which is predominantly denominated in USD.

What should be the ideal role of the RBI in controlling the Rupee value ?
RBI has managed the Rupee exchange rate with competence over the years, steering clear of the Asian flu, Russian flu etc. The RBI policy of -- festina lente -- (hastening slowly) on convertibility was fully vindicated by the turn of events. The present role of the RBI is adequate with an optimum mix of management and delegation.

Why is the Indian Rupee being kept stable despite comfortable forex reserves and high exports ?
The Indian Rupee has remained relatively stable over the years though it has depreciated gradually during the years.

Foreign exchange markets are volatile all over the world. It would appear that the term -- volatile -- was coined specially to describe the attributes of forex markets. Occasional volatility in exchange rates appears inevitable. What matters most is the trend.

In case of India, the forex market, demand/supply are in balance.

Sudden spurt in demand for dollars would weaken the Rupee. But the situation would revert to normalcy when the supply starts coming in. On the basis of economic fundamentals prospects are that the Rupee will continue to be relatively stable though with a few bouts of volatility.

What should the government further do to reduce volatility in the forex markets and help strengthen Rupee value ?
The government should create a propitious environment for foreign investment, ensure political stability and further the reforms process. It should try and curb speculative activity in the forex market. But it should refrain from taking harsh measures which will tighten the money market and reduce the incentives for the traders and banking community.

It should take a balanced approach and assure the market that it will act in a manner that will allow smooth working of the forex market.