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Exchange Rate Management:
Following two stage devaluation of the Indian rupee in quick succession in July 1991, the government introduced Liberalized Exchange Rate System (LERMS) with a view to allow the exchange rate to reflect the scarcity of foreign exchange. However in 1993, this system was replaced by a policy of unified exchange rate mechanism. Under this, exporters and other foreign exchange earners could convert their 100 percent foreign earnings at market rate. Thus presently, the exchange rate of the Indian rupee is determined by the supply and demand conditions in the foreign exchange market. RBI stands ready to intervene to maintain orderly market conditions and to curb excessive speculation.
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What is Inherent Limitation?
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