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Survey for flexible exchange rate

July 07, 2004 16:40 IST
Last Updated: July 07, 2004 16:44 IST

In the face of concerns over appreciating rupee eroding export competitiveness, the pre-Budget Economic Survey on Wednesday advocated a flexible exchange rate policy with the ability to intervene as and when necessary.

Economic Survey 2003-2004: Complete Coverage

"Exchange rate management policy needs to balance build-up of reserves and liquidity on one hand and maintaining external competitiveness with low inflation and interest rates on the other. Hence, the policy of flexibility in exchange rate together with the ability to intervene, if and when necessary, needs to be continued," the Survey said.

The Indian rupee, which started strengthening from June 2002 onwards, on monthly average basis appreciated 8.8 per cent by March 2004.

On an annual average basis, vis-a-vis the US dollar, the rupee after depreciating by 1.5 per cent in 2002-03, appreciated by 5.3 per cent in 2003-04.

Exporters had raised a hue and cry on the grounds that appreciation in rupee value vis-a-vis US dollar was eroding their competitiveness and sought RBI intervention or a fixed exchange rate policy on the lines of China.

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