Should RBI cut interest rates now that there is evidence of a slowdown in investment and output? Will an interest rate cut increase stability in inflation, the rupee, the current account, capital flows and GDP growth? The most dramatic development witnessed in recent days has been the high volatility in the foreign exchange market and a depreciation of the rupee. The pressure on the rupee has come about due to a decline in capital flows, while the current account deficit has risen to 4% of GDP, as the savings and investment gap has increased compared to previous years.