A combination of short-term monetary measures by the Reserve Bank of India, restrictions on capital outflows and policies to attract capital inflows will help stabilise the rupee and improve the medium term outlook, said Assocham president Rana Kapoor on Tuesday.
In a statement, Kapoor said the recent fluctuations in the Indian foreign exchange market is a lot like the Asian crisis of 1997-98, sparked by the loss of investor confidence in East Asia.
Between November 1997 and January 1998, the RBI hiked the bank rate (the rate at which it lends to banks) by 200 basis points, and the cash reserve ratio (CRR or the cash parked by the banks with the RBI) by 75 basis points. In April 1998, with the situation stabilised, it restored the bank rate to 9 per cent and CRR to 10 per cent.
In the current context, the RBI, should look at conventional measures to curb the volatility of the rupee to ensure macro financial stability and improve outlook by January 2014, he said.