Complicating the environment of monetary and exchange rate management further, there is now increasing evidence that exchange rate pass-through to domestic inflation has tended to decline from the 1990s across a number of countries. Inflation has turned out to be much less sensitive to exchange rates but has tended to equilibrate around the globe (Mohan, 2005).
In India, the exchange rate regime up to 1990 is best described as an adjustable nominal peg to a basket of currencies of major trading partners with a band.