Question

India has been operating on a managed floating exchange rate regime since March 1993. Explain the statement.

Answer 1

India has been following a flexible exchange rate system for many decades, where the foreign exchange rate is determined by the forces of demand for and supply of foreign exchange. Since 1993, the RBI has been intervening to purchase and sell foreign currencies when the foreign exchange rate is very low or high, i.e., India is now following the managed floating exchange rate system for controlling the fluctuation of the foreign exchange rate.