CSEET · Economic and Business Environment · Indian Financial Markets
Under India's present exchange rate arrangement, the external value of the rupee is determined mainly by:
The rupee's external value is determined mainly by demand and supply in the foreign exchange market, under a managed floating arrangement. The RBI does not fix a rate but intervenes from time to time to curb excessive volatility, rather than pegging the rupee to the dollar.
- AA fixed peg to the US dollar announced by the government
- BMarket forces of demand and supply, with the RBI intervening occasionally to curb excessive volatilityCorrect
- CA basket of gold and silver prices set by the RBI each day
- DDaily rates fixed by the Ministry of Commerce
Explanation
India follows a market-determined (managed floating) system. The RBI does not target a particular level but intervenes to smooth sharp swings. A fixed peg or administered rate is not the present framework.
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