According to the Article IV Report released in February 2013, the macroeconomic balance approach suggested India’s real exchange rate to be undervalued by 3.5 to 4.5 per cent, the ERER approach suggests the rupee is overvalued by around 12 per cent, and the external sustainability approach pointed to the real exchange rate remaining broadly in line with its medium-term economic value.
They should first and foremost focus on establishing sound fiscal and sustainable macroeconomic developments in their own country and complement this with the necessary structural reforms. By doing so, they will actually kill two birds with one stone, as they then also follow the best possible strategy for ensuring smooth integration into the euro area in a lasting manner.