According to this view, in order to prevent excessive capital inflows during this period, RBI should have allowed the exchange rate to “overshoot” quickly the targeted exchange rate of, say, Rs. 46.20 (or any other number) to, say, Rs. 45.50.
Thereafter, it should have allowed the rupee to depreciate slowly, but not necessarily smoothly, to the above targeted number over a period of next few months. In essence, this proposal is akin to a policy of (announced or unannounced) fixed exchange rate within a wider band. The RBI welcomes the current debate.