The adverse scenario would have contrary effects. In particular, the adjustment of portfolios would not favor the country leading the divergence, and real support to the rest of the world economy would be difficult. In both scenarios, the effects could be amplified or weakened by other non-monetary factors.
Discovering the remittances from Indian workers as a new source of meeting the growing financing needs, the period witnessed new confidence in the external sector and prepared the ground work for take off to the exchange rate regime based on a basket arrangement initiated since 1975.