Once the rupee starts falling how will you stop it?

"Rather like Goldilocks, commentators on the Indian rupee don't like the value of the currency too low or too high -- they would like it just right," wrote Prof Dahejia. According to some economists the rupee is overvalued which is hurting exports, and the increase in cheap imports is hurting Indian manufacturing. After depreciating against the dollar in 2015 and 2016, the rupee has appreciated by 5.1% in the first 6 months of this year, wrote Prof Nayyar. Why? Because real interest rate is very high in India which is encouraging a flow of foreign investment in stocks and bonds. This helps the government finance its current account deficit. "This stems from the compulsion of financing large current account deficits in the balance of payments through capital inflows provided by foreign institutional investors." Prof Nayyar recommends a drastic reduction in interest rate to help devalue the rupee. "It is incorrectly assumed that a stronger rupee only hurts exporters. Domestic industry, which may have zero exports, is also adversely affected by cheaper imports," wrote A Ranade. He believes that for the sake of exports and manufacturing "it is essential that we bring back the rupee to a more sane and competitive level". However, S Varma, Chief Economist at Nomura, believes that the rupee is undervalued by 2%. A Narayan is worried that importers are not hedging against currency fluctuation and that is dangerous. "It is not that the rupee is too strong relative to the US dollar, but rather that the US dollar is weak -- relative to a wide range of currencies, not just the rupee," wrote Prof Dehejia. We cannot influence Donald Trump's economic policies, so the Reserve Bank should continue with its monetary policy of targeting inflation rate and intervene in markets to prevent wide fluctuations in currency exchange rate. The Economic Survey II warned of risks of deflation because of low commodity prices and tightening of spending by states because of rising deficits as a result of loan waiver for farmers. The fall in retail inflation is mainly due to the fall in prices of vegetables and pulses, so this is merely disinflation and there is no danger of deflation, wrote T Kundu. A report by the Bank of International Settlements blames low wage rises for low inflation globally, wrote M Chakravarty. But in India, government schemes set a lower limit for wages and so wages continue to rise. Finally, there is the stock market. After closing at a record high of 32,462 on 1 August it is hovering just below 32,000 level today. If the policy rate is cut drastically foreign investors could flee which would cause the Sensex to fall, wiping billions from market capitalization of companies, the rupee would fall and inflation will jump. Easy to slow an ascent, how do you control a precipitous descent?