Reactive Bank of India

There are three problems in the way the Reserve Bank of India (RBI) has dealt with the ongoing currency crisis. First, the bank has shown a lack of appreciation of the new macroeconomic context. Second, it has used old “control” measures rather than new options and instruments to restore short-term balance. Third, it has taken it upon itself to solve the problem and has not leveraged India’s integration with its regional trade partners.

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