Second Quarter Review of Monetary Policy 2013-14

By
Dr. Raghuram G. Rajan
Governor
Part A. Monetary Policy
Monetary and Liquidity Measures
Following an assessment of the evolving macroeconomic situation, the Reserve Bank has
decided to:
reduce the marginal standing facility (MSF) rate by 25 basis points from 9.0 per cent
to 8.75 per cent with immediate effect;
increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis
points from 7.5 per cent to 7.75 per cent with immediate effect
keep cash reserve ratio (CRR) unchanged at 4.0 per cent of net demand and time
liability (NDTL); and
increase the liquidity provided through term repos of 7-day and 14-day tenor from
0.25 per cent of NDTL of the banking system to 0.5 per cent with immediate effect.
Consequently, the reverse repo rate under the LAF stands adjusted to 6.75 per cent and
the Bank Rate stands reduced to 8.75 per cent with immediate effect. With these
changes, the MSF rate and the Bank Rate are recalibrated to 100 basis points above the
repo rate.
Assessment
2. Since the Mid-Quarter Review in September, the outlook for global growth has
improved modestly, with fiscal concerns abating in the US and lead indicators of activity
firming up in the Euro area and the UK.
3. In emerging and developing economies, the prospect of delay in the taper of the
Federal Reserves bond purchases has brought calm to financial markets, and capital
flows have resumed. Nevertheless, headwinds to growth from domestic constraints
continue to pose downside risks, and vulnerabilities to sudden shifts in the external
environment remain.
4. In India, industrial activity has weakened, with a contraction in consumer durables and
tepid growth in capital goods reflecting the ongoing downturn in both consumption and
investment demand. Strengthening export growth and signs of revival in some services,
along with the expected pick-up in agriculture, could support an increase in growth in the
second half of 2013-14 relative to the first half, raising real GDP growth from 4.4 per cent
in Q1 to a central estimate of 5.0 per cent for the year as a whole (Chart 1). The revival of
large stalled projects and the pipeline cleared by the Cabinet Committee on Investment
may buoy investment and overall activity towards the close of the year.

5. In the meantime, with many large entities holding back on payments, liquidity
pressures are building up on small and medium enterprises. A number are facing
conditions of financial distress. Remedies partly lie in the speed-up of government and
public sector payments, and on measures to channel credit to small and medium
enterprises.
6. Inflation measured by the wholesale price index (WPI) rose in September for the fourth
month in succession. The pass-through of rupee depreciation into prices of manufactured
products is acting, along with elevated food and fuel inflation, to offset possible
disinflationary effects of low growth. While food price pressures may ease with the arrival
of the kharif harvest and the usual seasonal moderation, overall WPI inflation is expected
to remain higher than current levels through most of the remaining part of the year (Chart
2), warranting an appropriate policy response.

7. Retail inflation measured by the consumer price index (CPI) has also risen sharply
across food and non-food constituents, including services, keeping inflation expectations
high. Notwithstanding the expected edging down of food inflation, retail inflation is likely to
remain around or even above 9 per cent (Chart 3) in the months ahead, absent policy
action.

8. Liquidity management has been calibrated to the systems requirements arising from
the sharp pick-up in credit relative to deposit growth and festival-related demand for
currency. Liquidity up to 0.5 per cent of bank-wise NDTL is available through overnight
LAF repos. Furthermore, export credit refinance of up to 50 per cent of eligible export
credit outstanding amounts to approximately 0.5 per cent of system-level NDTL. To
provide market participants with additional access to primary liquidity, as well as greater
flexibility in managing reserve requirements, term repos of 7-day and 14-day tenor have
been introduced to provide liquidity equivalent to 0.25 per cent of NDTL. As a result of the
measures taken by the Reserve Bank to ease liquidity, the average drawal on the MSF
has declined significantly from about `1.4 trillion in mid-September to `0.4 trillion by mid-
October, and money market rates have fallen by 125 basis points. Going forward,
however, the more durable strategy for mitigating mismatches between the supply of, and
demand for, funds is for banks to step up efforts to mobilise deposits.
9. As regards the external sector, the improvement in export performance over the last
two months, coupled with the contraction in non-oil import demand, has enabled a
perceptible narrowing of the trade deficit with favourable implications for the current
account deficit (CAD) going forward. Policy interventions have bridged the external
financing gap. These factors have brought some calm to the foreign exchange market.
However, normalcy will be restored to the exchange market only when the demand for
dollars from public sector oil marketing companies is fully returned to the market.
Policy Stance and Rationale
10. From September, as steps to contain the CAD started taking effect in an improving
external environment, volatility in the foreign exchange market ebbed and it became
possible to unwind the exceptional liquidity tightening measures. Keeping in view the
need to infuse liquidity into the system to normalise liquidity conditions, term repos will
now be conducted for a total notified amount equivalent to 0.5 per cent of NDTL of the
banking system. In addition, the MSF rate will be reduced by 25 basis points.
11. With the more recent upturn of inflation, and with inflation expectations remaining
elevated anticipating the pass-through of exchange rate depreciation and ongoing
adjustment in administered fuel prices, it is important to break the spiral of rising price
pressures in order to curb the erosion of financial saving and strengthen the foundations
of growth. It is in this context that the LAF repo rate has been increased by 25 basis
points.
12. With the reduction of the MSF rate and the increase in the repo rate in this review, the
process of re-aligning the interest rate corridor to normal monetary policy operations is
now complete.
13. The policy stance and measures in this review are intended to curb mounting
inflationary pressures and manage inflation expectations in a situation of weak growth.
These will help strengthen the environment for growth by fostering macroeconomic and
financial stability. The Reserve Bank will closely monitor inflation risk while being mindful
of the evolving growth dynamics.
Mid-Quarter Review of Monetary Policy 2013-14
14. The next Mid-Quarter Review of Monetary Policy for 2013-14 will be announced
through a press release on Wednesday, December 18, 2013.
Third Quarter Review of Monetary Policy 2013-14
15. The Third Quarter Review of Monetary Policy for 2013-14 is scheduled on Tuesday,
January 28, 2014.
Part B. Developmental and Regulatory Policies
16. This part of the Statement reviews the progress on various developmental and
regulatory policy measures announced by the Reserve Bank in recent policy statements
and also sets out new measures.
17. The Reserve Banks developmental measures over the next few quarters will be
built on five pillars. These are:
a. Clarifying and strengthening the monetary policy framework.
b. Strengthening banking structure through new entry, branch expansion, encouraging
new varieties of banks, and moving foreign banks into better regulated organisational
forms.
c. Broadening and deepening financial markets and increasing their liquidity and
resilience so that they can help absorb the risks entailed in financing Indias growth.
d. Expanding access to finance to small and medium enterprises, the unorganised sector,
the poor, and remote and underserved areas of the country through measures to
foster financial inclusion.
e. Improving the systems ability to deal with corporate distress and financial
institution distress by strengthening real and financial restructuring as well as debt
recovery.
18. Action on the monetary policy framework will follow the submission of the Dr. Urjit
Patel Committee report. A number of measures to strengthen bank structures and
financial markets have already been announced, and more will follow as they are worked
out. The strategy to expand financial inclusion will be informed by the Dr. Nachiket Mor
Committee report, though significant efforts to explore the use of technology are already
underway. Finally, some steps to improve restructuring and recovery will be announced
soon.
I. Developments and Policies: Banking Structure
Basel III Regulation on Countercyclical Capital Buffer
19. As part of the Basel III capital framework, an internal Working Group (Chairman: Shri
B. Mahapatra) was constituted to operationalise the countercyclical capital buffer
framework in India. It is proposed to:
place the draft report of the group on the Reserve Banks website by end-November
2013 for inviting comments/suggestions from various stakeholders.
Framework for Dealing with Domestic Systemically Important Banks
20. The Basel Committee on Banking Supervision (BCBS) provided a framework for
dealing with domestic systemically important banks (D-SIBs) in October 2012. The D-SIBs
framework is principle-based and provides broad guidance to national authorities on
assessment of the systemic importance of banks and additional capital requirements of D-
SIBs. It is proposed to:
place a draft of the proposed framework for D-SIBs on the Reserve Banks website
by end-November 2013.
Guidelines on Stress Testing
21. The Reserve Bank had issued guidelines on stress testing in June 2007. These
guidelines required banks to have a sound stress testing policy which will determine
liquidity risk, interest rate risk, credit risk and foreign exchange risk under stressed
scenarios. Drawing from the BCBS principles on the subject and subsequent global
developments, it is proposed to:
issue updated guidelines on stress testing by end-November 2013.
Unhedged Foreign Currency Exposures of Corporates
22. Unhedged foreign currency exposures of corporates are a cause for concern as they
pose a risk to individual corporates as also to the entire financial system. Based on
feedback received from industry participants, it is proposed to:
issue final guidelines on unhedged foreign currency exposures by end-December
2013.
Periodicity of Payment of Interest on Rupee Savings/Term Deposits
23. As per extant instructions, banks are required to pay interest on savings deposits and
term deposits at quarterly or longer intervals. As all commercial banks are now on core
banking platforms, it has been decided to:
give banks the option to pay interest on savings deposits and term deposits at
intervals shorter than quarterly intervals.
Licensing of New Banks in the Private Sector - Constitution of High Level Advisory
Committee
24. In terms of the guidelines for licensing of new banks in the private sector released on
February 22, 2013 applications will be screened by the Reserve Bank to
ensure prima facie eligibility, and thereafter, the applications will be referred to a High
Level Advisory Committee (HLAC). The HLAC will devise its own procedures for
screening the applications and submit its recommendations to the Reserve Bank for
consideration. The decision to issue an in-principle approval for setting up of a bank will
be taken by the Reserve Bank whose decision in this regard will be final.
25. The HLAC has been set up under the Chairmanship of Dr. Bimal Jalan, former
Governor of the Reserve Bank with Smt. Usha Thorat, former Deputy Governor of the
Reserve Bank, Shri C.B. Bhave, former Chairman, Securities and Exchange Board of
India (SEBI) and Dr. Nachiket M. Mor, Director, Central Board of Directors of the Reserve
Bank as members. The Committee will hold its first meeting on November 1, 2013.
Mode of Presence of Foreign Banks in India Scheme of Subsidiarisation
26. As a sequel to the roadmap for presence of foreign banks in India released by the
Reserve Bank in 2005 and pursuant to the announcement made in the Monetary Policy
Statement of April 2010, the Reserve Bank released a Discussion Paper on the presence
of foreign banks in India on January 21, 2011 factoring in the lessons from the crisis which
favoured a subsidiary mode of presence from a financial stability perspective. Taking into
account the feedback received from stakeholders, a scheme of subsidiarisation of foreign
banks in India, guided by the two cardinal principles of reciprocity and single mode of
presence, is being finalised. The Wholly Owned Subsidiaries (WOSs) would be given
near-national treatment, including in the opening of branches.
27. While it will not be mandatory for existing foreign banks (i.e., banks set up before
August 2010) to convert into WOSs, they will be incentivised to convert into WOSs by the
attractiveness of the near-national treatment afforded to WOSs. The initial minimum paid-
up voting equity capital or net worth for a WOS shall be `5 billion. It is proposed:
to issue the Scheme by mid-November 2013.
II. Developments and Policies: Financial Markets
Retail Inflation Indexed Securities
28. The Union Budget, 2013-14 proposed to introduce instruments that will protect
savings from inflation and provide an alternative to gold as an investment avenue for
individuals. Inflation indexed securities for retail investors of 10-year tenor would be linked
to the new (combined) consumer price index. Eligible investors would consist of
individuals, hindu undivided families (HUFs), trusts and charitable institutions. The rate of
interest on these securities would comprise of a fixed rate plus inflation. Interest would be
compounded half-yearly and paid cumulatively at redemption. These securities will be
distributed through banks to reach out to the masses. Accordingly, it is proposed to:
launch Inflation Indexed National Saving Securities (IINSSs) for retail investors in
November/December 2013 in consultation with the Government of India.
Cash Settled 10-year Interest Rate Futures Contracts
29. In order to develop the money and government securities markets, it has been
decided to introduce cash settled 10-year Interest Rate Futures (IRF) contracts. Product
design and operational modalities are being discussed with all stakeholders, including
market bodies and stock exchanges, and after taking into account their feedback, the
Reserve Bank, in consultation with the SEBI, would:
issue guidelines by mid-November 2013 and the product is expected to be launched
by the exchanges by end-December 2013.
Credit Enhancements in Corporate Bonds
30. The corporate bond market in India currently lacks sufficient depth and liquidity. As a
result, corporates have significant dependence on bank financing. Therefore, it is
proposed to:
allow banks to offer partial credit enhancements to corporate bonds by way of
providing credit facilities and liquidity facilities to the corporates, and not by way of
guarantee. Detailed guidelines in this regard will be issued separately.
Revision in the Timing of Marginal Standing Facility
31. With a view to facilitating settlement of electronic funds transfers as well as to reduce
unnecessary volatility in reserve maintenance, it has been decided to:
revise the timing of MSF operations. With effect from November 5, 2013 they will be
conducted between 7.00 pm and 7.30 pm instead of between 4.45 pm and 5.15 pm.
Repo Facility for Mutual Funds
32. On July 17, 2013 the Reserve Bank had opened a special repo window for mutual
funds with a view to enabling banks to meet the liquidity requirements of mutual funds.
With the normalisation of exceptional measures and taking into consideration the
improvement in liquidity conditions since then, it has been decided to close this window
with immediate effect.
Technical Committee on Services / Facilities for Exporters
33. Some recommendations of the Technical Committee on Services/Facilities to
Exporters (Chairman:
Shri G. Padmanabhan) such as an increase in the limit of e-commerce transactions and
extending the time period for submission of documents under project exports,
simplification of reporting requirement of forward contracts booked over-the-counter
(OTC) and extending the limit for exporters to cancel and rebook the forward contracts
have been accepted and necessary guidelines have been issued. Other
recommendations are being analysed in coordination with government agencies/other
stakeholders for implementation.
III. Developments and Policies: Financial Inclusion and
Payment and Settlement Systems
General Credit Card Scheme
34. The coverage of the General Credit Card (GCC) Scheme is being revised to enhance
credit linkage of individuals to all non-farm entrepreneurial activities within the rubric of the
overall priority sector. It is expected that the revised scheme will give a fillip to flow of
credit to small businesses and low income households. Detailed guidelines in this regard
will be issued before mid-November 2013.
Roadmap for Provision of Banking Services in Unbanked Villages
35. State Level Bankers Committees are mandated to prepare a roadmap covering all
unbanked villages of population less than 2000 and to notionally allot these villages to
banks for providing banking services. Accordingly, about 4,90,000 unbanked villages
have been identified and allotted to various banks to be covered by March 2016.
Rural Co-operatives: Streamlining of Short-Term Co-operative Credit Structure
36. In January 2013, the Reserve Bank constituted an Expert Committee (Chairman: Dr.
Prakash Bakshi) on the short-term co-operative credit structure. The recommendations
taken up for implementation include, inter alia, improvement of governance and
management of rural co-operatives, moving to Core Banking Solutions (CBSs) and setting
up of a Working Group to examine human resources requirement of rural co-operative
banks following the transition of state co-operative banks and district central co-operative
banks to CBS.
Customer Service - Charges Levied by Banks for Sending SMS Alerts
37. With a view to ensuring reasonableness and equity in the charges levied by banks for
sending SMS alerts to customers, banks are advised to leverage the technology available
with them and the telecom service providers to ensure that such charges are levied on all
customers on actual usage basis.
Payment and Settlement Systems Electronic Bill Payments System - GIRO Advisory
Group
38. Following the report of the Committee for Implementation of GIRO Based Payment
System highlighting the need for an electronic bill payment system based on a GIRO
model for payment of dues of essential services, insurance premia, utility payments,
taxes, university fees, examination fees and the like, a GIRO Advisory Group (Chairman:
Prof. Umesh Bellur) has been constituted with representation from banks and other
stakeholders. The Group is expected to submit its report by end-December 2013.
Technical Committee on Expansion of Access to Mobile Banking
39. A Technical Committee (Chairman: Shri B. Sambamurthy) has been constituted to
examine various options/alternatives, including the feasibility of encrypted SMS-based
funds transfer using an application which can run on any type of handset, for expansion of
mobile banking in the country. The Committee is expected to submit its report by end-
December 2013.
Security and Risk Mitigation Measures for Card Present and Electronic Payment
Transactions
40. The Reserve Bank has advised banks to put in place by end-June 2013 security
features in order to secure card transactions and the electronic banking infrastructure. A
review of banks preparedness in this regard indicates that technical glitches are
hampering the transition to the desired environment. Accordingly, a one-time extension
has been granted to stakeholders.
Cash Pay-out from Prepaid Payment Instruments Issued by Non-bank Entities
41. In order to further popularise prepaid payment instruments (PPIs) and facilitate
remittance of funds by people not having bank accounts, a pilot is being planned with
select non-bank PPI issuers to study the technological and operational feasibility of
allowing cash pay-out (remittance) from PPIs issued by non-bank entities using Aadhaar
based bio-metric authentication. The broad technical, operational and functional
parameters of the pilot are being finalised in consultation with participants and the pilot is
expected to go live before end-March 2014.
IV. Restructuring
Non-Banking Financial Companies (NBFCs): Restructuring Guidelines
42. The Reserve Banks Working Group (Chairman: Shri B. Mahapatra) reviewed
prudential guidelines on restructuring of advances by banks and financial institutions and
relevant guidelines to banks have been issued. As NBFCs are also part of the financial
institutions that lend to the sectors where restructuring benefits are now available, either
as part of a consortium or otherwise, it has been decided to:
review the extant instructions on restructuring for NBFCs and issue guidelines in the
matter by end-November 2013.
V. Institutional and Other Developments
Recommendations of the Financial Sector Legislative Reforms Commission
(FSLRC)
43. It is proposed to implement the following recommendations of the FSLRC pertaining to
consumer protection and capacity building:
All instructions relating to consumer services/consumer protection would be
consolidated and will be placed on the Reserve Banks website as a single group of
instructions by end-March 2014 and they will be examined for gaps, if any.
A Committee will be set up by the Reserve Bank to examine capacity building,
including basic and job specific knowledge requirements and examine whether a
system of formal certification is warranted for certain job descriptions within the
Reserve Bank and in the financial entities and market segments regulated by it.
The Reserve Bank will examine its own public facing services and institute time-
bound response guidelines where feasible and not already in place. Such guidelines
will be placed on the Reserve Banks website by January 2014.
Currency Management: Distribution of Banknotes and Coins
44. Banks were advised to explore the possibility of meeting the growing demand for
banknotes and coins in the country through Business Correspondents (BCs) and consider
engaging the services of Cash in Transit (CIT) entities to address last mile connectivity
issues. Instructions have been issued on September 10 and October 10, 2013, permitting
banks to include distribution of banknotes and coins in the scope of activities which may
be undertaken by BCs/CITs.
45. Banks have also enhanced their capacity to take over the retail function of
distribution of notes and coins and adjudication of mutilated notes. They have so far
identified 805 bank branches for the purpose. Correspondingly, the distribution level
across the Reserve Banks counters has decreased by 61 per cent and 64 per cent for
notes and coins, respectively, and the adjudication of notes by 51 per cent.
Detection and Reporting of Counterfeit Banknotes
46. In view of the recommendation of the Department-related Parliament Standing
Committee (DPSC) to introduce a scheme of incentives in order to encourage banks to
report counterfeit notes detected by them, instructions were issued to banks on June 27,
2013 on the procedure to be followed and compensation to banks for detection of
counterfeit notes and penalty for non-detection/reporting thereof.
Mumbai
October 29, 2013













RBI announces Measures to address Exchange Rate Volatility
The market perception of likely tapering of US Quantitative Easing has triggered outflows
of portfolio investment, particularly from the debt segment. Consequently, the Rupee has
depreciated markedly in the last six weeks. Countries with large current account deficits,
such as India, have been particularly affected despite their relatively promising economic
fundamentals. The exchange rate pressure also evidences that the demand for foreign
currency has increased vis-a-vis that of the Rupee in part because of the improving
domestic liquidity situation.
Against this backdrop, and the need to restore stability to the foreign exchange market,
the following measures are announced:
i. The Marginal Standing Facility (MSF) rate is recalibrated with immediate effect to be
300 basis points above the policy repo rate under the Liquidity Adjustment Facility
(LAF). Consequently, the MSF rate will now be 10.25 per cent.
ii. Accordingly, the Bank Rate also stands adjusted to 10.25 per cent with immediate
effect.
iii. The overall allocation of funds under the LAF will be limited to 1.0 per cent of the
Net Demand and Time Liabilities (NDTL) of the banking system, reckoned as
Rs.75,000 crore for this purpose. The allocation to individual banks will be made in
proportion to their bids, subject to the overall ceiling. This change in LAF will come
into effect from July 17, 2013.
iv. The Reserve Bank will conduct Open Market Sales of Government of India
Securities of Rs.12,000 crore on July 18, 2013. Details of the securities included for
the OMO sale auction will be announced through a separate press release
tomorrow.
The Reserve Bank will continue to closely monitor the markets, the liquidity situation and
the macroeconomic developments and will take such other measures as may be
necessary, consistent with the growth-inflation dynamics and macroeconomic stability.
Alpana Killawala
Chief General Mana



















Factors affecting the fluctuations in exchange rate of the Indian
Rupee

Page 8
policy response is to find a balance. Recent data shows that RBI had indeed
intervened by selling forexreserves selectively to support Rupee.Source:RBI
b. Raising Interest Rates:
The rationale is to prevent sudden capital outflows and ultimately lead to
higher capital inflows. But Indias interest rates are already higher
than most countries. This was done
to tame inflationary expectations. So further raising interest rates
would lead to lower growth levels.
c. Make Investments Attractive-
Easing Capital Controls: RBI can take steps to increase the supply of foreign
currency by expanding market participation to support Rupee. RBI can increase
the FII limit oninvestment in government and corporate debt instruments. It
can invite long term FDI debt funds ininfrastructure sector. The ceiling for
External Commercial Borrowings can be enhanced to allow moreECB borrowings.
2. Measures by Government:
Government should take some measures to bring FDI and create ahealthy
environment for economic growth. Key policy reforms that should be initiated
includes rollingof Goods and Services Tax (GST), Direct Tax Code
(DTC), FDI in aviation and retail, Companies Bill anddiesel decontrol.
Efforts should be made to invite FDI but much more needs to be done
especially afterthe holdback of retail FDI and recent criticisms of policy
paralysis. The government took steps recentlyto loosen rules for portfolio
investment in the Indian market, indicating its desire to sustain
externalinflows. The measure to increase External Commercial Borrowings
(ECB) to $10bn will help inborrowing in dollar at a less cost. It may take
similar steps to encourage FDI as well, helping sustainexternal funding.
11. Conclusions
The initial success story of India was clearly based on factor driven
economy based on labour arbitragethat is providing low cost labour in
comparison to another country. At this stage development issensitive to global
business cycle and exchange rate fluctuation. We need to move towards
beinginvestment driven economy that is efficiency driven in the form of
infrastructure development,improving skill of work force and make that
investment which translate into tangible productivity acrossthe
board. Final stage which can make India to be developed economy is to
be innovation driveneconomy that can create unique value of India at global
economy level. We need to accelerate reformprocess that would make
economy resistant to external shocks and changes in economy cycles
andcurrency fluctuations. The bottom line is our policy should
concentrate on enhancing our capability inmanufacturing, promote
entrepreneurship and provide incentive for innovations. We need toremember
that the challenge which we are facing is not only about currency risk but it is
about movingto growth and development.The Indian Rupee
has depreciated significantly against the US Dollar marking a new risk
for Indianeconomy. Grim global economic outlook along with high
inflation, widening current account deficit andFII outflows have
contributed to this fall. RBI has responded with timely interventions by selling
dollars


Factors affecting the fluctuations in exchange rate of the Indian
Rupee

Page 9
intermittently. But in times of global uncertainty, investors prefer USD as a
safe haven. To attractinvestments, RBI can ease capital controls by increasing
the FII limit on investment in government and
corporate debt instruments and introduce higher ceilings in ECBs.
Government can create a stable
political and economic environment. However, a lot depends on the
Global economic outlook and thefuture of Eurozone which will determine
the future of INR.
12. Scope for Further Research
Due to the limitations in the number of words we were only able to
perform regression on 3factors affecting the Exchange rate of
Indian Rupee. We can further add other major factors to
explain the volatility of Indian Rupees exchange rate. Certain factors
like
public debt, goldreserves, FII, FDI, foreign exchange reserves, bank rates,
trading terms,
etc., can be added to theindependent factors and a multiple
regression of the same can give a better picture of thedependence of
exchange rate on these factors. There are several other factors
which influencethe exchange rate like socio-economic policies,
political scenarios etc., but many of them areout of scope of
mathematical correlations as they are not measurable easily.
13. Acknowledgments
We are highly indebted to Great Lakes Institute of Management for
giving us the opportunity toundertake this project in the capacity of
the course Macroeconomics.We are very grateful to our Professor Dr.
Rakesh Singh for enabling us to understand the worldeconomy and
enlightening us about the current and past economic trends.We are
also obliged to Dr. Muthuraj for his continuous guidance.We as a team
are thankful to each other for our continuous efforts in contributing
to theproject.
14. References


http://www.iioa.org/pdf/17th%20Conf/Papers/4743149_090505_155551_INPUT_OUTPUT_
MODELING_OF_IMPACT_OF_EXCHANGE_RATE_FLUCTUATIONS_ON_INDIAN
_ECONOMY.[1].PDF


http://www.quandl.com/WORLDBANK-World-Bank/IND_NY_GDP_MKTP_CN-India-
GDP-current-LCU


http://www.quandl.com/WORLDBANK-World-Bank/IND_BN_CAB_XOKA_GD_ZS-
India-Current-account-balance-of-GDP


http://www.quandl.com/WORLDBANK-World-Bank/IND_FR_INR_LEND-India-Lending-
interest-rate



Factors affecting the fluctuations in exchange rate of the Indian
Rupee

Page 10


http://www.quandl.com/WORLDBANK-World-Bank/IND_NY_GDP_DEFL_KD_ZG-
India-Inflation-GDP-deflator-annual


http://golak.tripod.com/icfai_ex_rate.pdf


http://zenithresearch.org.in/images/stories/pdf/2012/March/ZIJBEMR/22_ZIJBEMR_MARC
H12_VOL2_ISSUE3.pdf


http://www.indiastat.com


http://www.rbi.org.in


http://www.tradingeconomics.com
15. Appendix/Annexure

Assumptions:
1.

We have assumed that all the other factors that influence rupee fluctuation
besides InterestRates, Inflation, and Current Account Deficit (CAD) are held
constant.2.

We have considered the period since when India has opened
for Liberalization, Privatization andGlobalization (LPG) i.e., 1991
onwards.We are attaching the graphs of the three dependant variables in the
following pages to give a betterpicture of how these variables have been
fluctuating in the recent past.