Why the rupee is down – and only capital flows can rescue it

The joker in the pack this year has been the Indian rupee. At a time when the Indian and Chinese economies may be the last men standing, the rupee – unlike the Chinese yuan – is into steep decline and fall. On Tuesday, the rupee hit a two-year low of 48.24 against the US dollar, suggesting that short-term demand and supply issues are determining its value when the macro-fundamentals should actually lead to a strengthening of the Indian currency.

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