I gave a speech last week on the impossible trinity, so to the extent you have a freely floating exchange rate you have greater, more independent monetary policy. WSJ: Are you satisfied with the intervention you undertook last year on the foreign exchange market? SUBBARAO: Yes. I would think so, especially on speculation.
If you don’t intervene, the speculative forces could be self reinforcing which is that exporters would defer bringing their receipts in and importers would buy forwards. That’s a self-reinforcing feedback loop. To the extent that we curbed speculation and showed that determination, it certainly helped. WSJ: So 54 rupees to the dollar was a level you weren’t comfortable?