Wednesday, August 28, 2013

Why has govt failed to arrest rupee\'s free fall?

The government has taken many steps to contain the free fall of rupee in the past few days but has failed to check the slide. Slumping further, the rupee tested new record low of 68.75 versus the US dollar.

Reserve Bank of India's (RBI's) recent intervention did precious little to save rupee from depreciating further. India\'s currency has lost over 19 percent against the dollar this year.

In order to arrest the rupee slide, RBI had announced measures such as restriction on Indian firms investing abroad and on outward remittances by resident Indians, triggering talks of return of capital control regime.

At the Interbank Foreign Exchange (Forex) market, the rupee on Wednesday fell past 68 mark to trade at fresh low of 68.75 against dollar.

What are the reasons that have impeded the efforts of the government in tackling rupee fall? Why can't the government check the depreciation of rupee? Why have even RBI measures aimed at tightening liquidity failed to give a boost to the staggering rupee? These are a few questions that continue to crop up every time rupee crashes to newer lows.
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