The government of India announced a few measures to reassure the financial markets that there was no benign neglect of the fate of the Indian rupee. Most of the measures were meant to encourage short-term capital inflows from abroad. The Governor of RBI feared that the supply of US dollar, globally, would dry up as the Federal Reserve shrank its balance sheet and as the US government issued more bonds to finance its budget deficit. India’s short-term external debt (residual maturity of less than one year) amounted to $222.2 billion in the financial year ending March 2019. Funding a current account deficit of around $50-70 billion on top of this repayment demand for dollars, therefore, became both urgent and important. Any government can weaken its currency more easily than it can strengthen it. Beyond that, fixing India’s export uncompetitiveness requires a fundamental reboot, not of the economy, but of policymaking in India. In fact, the crisis of 2008 has not left America, but India (and China) structurally weaker. It is one thing to announce measures to attract dollars to India, but another to impose restrictions on Indian-origin folks for managing funds investing in India.

(Live Mint)