Authors: N R Bhanumurthy, NIPFP, and Chandan Sharma, FORE

Following the appreciation of the rupee/dollar exchange rate in early May and the expectation of interest rate hikes, there was some apprehension that the rate hike could result in further appreciation of the rupee and could hurt exports. In particular, it would hurt the low value-added exports from small and medium enterprises.

Since the recent recovery in exports happens to be the biggest factor for a sharp rise in industrial output growth, this imminent rate hike was opposed. Read more…