In this speech I have recalled that ill developments and practices in major financial centres at the start of the millennium and the ensuing financial crisis were a deep underlying source of the crisis that we face in Europe still today. This is not to deny that other factors also played a role.
Even in the most efficient markets, ‘ideal’ conditions do not exist, and forward premia as a result have not been able to predict future spot rates accurately. The actual exchange rates are usually overvalued or undervalued in terms of the purchasing power parity. Under Indian conditions, however, there are some additional questions.