After all, exchange rate policy will form part of the overall macroeconomic policy and will, therefore, have to be subservient to overall macroeconomic targets. The conduct of exchange rate policy during 1996-97 was primarily guided by market conditions resulting from the contraction in the current account deficit and resurgence of capital inflows.
Foreign exchange reserves (including gold) scaled a peak of $ 26.4 billion by end-March 1997, without sacrificing exchange rate stability. In regard to 1997-98, the exchange rate policy needs to be seen in the context of the Monetary Policy Statement of April 15, 1997.