Rampant policy confusion

• Central Bank and govt. are not on the same page about the direction of the country’s exchange rate
• CB on Monday said it had decided to devalue the rupee to “not more than” 230 against the US dollar

Confusion appears to be the order of the day. Just after the Central Bank Governor Ajith Nivard Cabraal told bank CEOs yesterday that the rupee was floated, providing some much needed clarity, the Finance Ministry in a bizarre statement announced a Rs. 20 Avurudu incentive for each migrant dollar.   

On Monday, the Cabinet however decided to give an incentive of Rs.38 per migrant dollar, which the latest Finance Ministry statement neither denied nor confirmed. At the same time, it is not clear how the government plans to offer a Rs. 20 incentive per migrant dollar when the rupee is floated, as claimed by the Central Bank Governor.   

The Central Bank on Monday said it had decided to devalue the rupee to “not more than” 230 against the US dollar with immediate effect. The confusion created by the statement, left the forex market guessing whether what was announced was a new upper cap replacing the previous cap of Rs. 200-203, or the Central Bank had allowed the rupee to float.   

With the latest Finance Ministry statement, it appears that the Central Bank and the government are not on the same page about the direction of the country’s exchange rate.   

• it is not clear how the govt. plans to offer a Rs. 20 incentive per migrant dollar when the rupee is floated, as claimed by the CB Governor
• The Central Bank on Monday said it had decided to devalue the rupee to “not more than” 230 against the US dollar with immediate effect