UPSC Practice recommends Tested method to reverse capital flow.
At current levels of the rupee, the RBI’s intervention in the forex market has been designed to track fundamentals. This is expected to continue as portfolio capital flows out on monetary normalisation by the US Federal Reserve and India’s trade deficit widens on dearer oil. The effects of a hard landing of the US economy are beginning to show up in a softening of global energy prices and the rupee is likely to drift down gently.
Courtesy: ET Editorial-Opinion-Economic Times