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If export competitiveness were to be the guide for currency management, there's still a long way for the rupee to go, given that at the beginning of this month, the 40-country real effective exchange rate (REER) showed that the rupee was overvalued by 8%. Only part of this would have corrected by now.
One should not have a problem with this. After all, John Maynard Keynes famously said, 'I change my mind when the facts do.' However, while we armchairwalas need not cringe in embarrassment, we should also have a heart for companies and households that face the brunt of what feels like a quick — and largely unanticipated — regime change.
Exporters might get a leg-up. But think of those who borrowed in dollars in the hope that India's massive forex reserves will serve as the 'umbrella' when bad luck poured down on the currency market. Think of importers for whom pricing in a close-to-86 exchange rate to the dollar would have been the most extreme of contrarian views just six months ago.
Think of the lakhs of parents who sent their kids abroad. Think also of foreign investors who bought stocks and bonds who find their dollar returns eroded by the rupee's fall.
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