There are, in the main, three alternative approaches that have been suggested for consideration: ·  One view advanced by several distinguished economists, including Prof. Kenneth Rogoff of IMF during his recent visit to India, is that rupee should be allowed to appreciate freely in line with market trends.
According to this view, there is no strong case for RBI’s further intervention as reserves are already very high. RBI’s purchases create substantial additional domestic liquidity, which may be destabilising in the long run. There is also no evidence, in their opinion, that unconstrained appreciation or volatility would affect growth prospects or lead to any other macro-economic problem.