Friday, August 30, 2013

Cure for Indian Rupee

The Indian government has created a huge problem, as it has under-reported the rate of increase in the cost-of-living or inflation. And by not measuring inflation properly, the government has kept interest rates negative in real terms. What the government can do or should do is, though it can be painful, it should increase rates substantially, stabilize the rupee. To increase rates would imply lot of pain in the economy temporarily, but in the long term, it would be desirable.