The cost of selling.

"Sounding a note of caution, the Finance Ministry's Economic Review said...that inflation may witness another resurgence in case of deterioration of geopolitical situation leading to higher global energy prices and supply chain pressures." "Retail inflation for India during these six months stood at 7.2 percent, lower than the world inflation of 8 percent, as represented by the median inflation of major economies, it said. During the same period, it said, the INR had depreciated by 5.4 percent against the USD, less than the depreciation of 8.9 percent of six major currencies in the DXY index." That may be because no other central bank has burned $114.08 billion to strengthen their currency as the Reserve Bank of India (RBI) has done. ET. "Market analyst Sunil Shah...said even though the rupee as a currency has weakened in comparison to the US dollar, but it is still far stronger than other currencies." ET. As a result, "Indian exporters are holding back on dollar sales on hopes of a further slide in the rupee, eyeing a windfall as the local currency plumbs record lows this year." ET. "The swift depreciation of the rupee against the dollar in the recent sessions saw it breach the psychologically-crucial 83-mark." ET. "Year-to-date, the USD/INR is down by nearly 6%, and experts see further depreciation in the Indian unit, triggered by imported inflation." So, as the rupee falls imports become more expensive and higher inflation causes further weakness of the rupee. The World Economic Outlook (WEO) report of the International Monetary Fund (IMF) in April 2021 projected India's nominal GDP for 2026-27 at Rs 389.01 trillion and $4.534 trillion. However, in its October WEO the IMF revised its forecast to Rs 392.84 trillion and $4.393 trillion, wrote Prof V Anantha Nageswaran, now the Chief Economic Advisor (CEA) to the Government of India since 28 January. pib.gov.in. "So, secondary-school arithmetic will tell us that the Fund has become relatively more pessimistic on the Indian rupee versus US dollar (USD). From 70.9 in 2020-21, the Fund sees the rupee depreciating to 89.4 against the US dollar by 2026-27," wrote an outraged Nageswaran. Looks like the IMF was a better judge of our economy than our CEA. "One school of thought that prevails is that inflation is largely driven by food and fuel prices, and hence, there isn't much the RBI can do to control inflation by raising the repo rate," wrote Vivek Kaul. However, "The core inflation in September was 6.5%." "A possible explanation could lie in the high inflation that has seeped into wage inflation as people have demanded higher wages to compensate for higher prices." While the RBI is reluctant to raise rates, the liquidity in banks "is approaching pre-Covid-19 level of Rs 3 lakh crore (Rs 3 trillion) and adjusting for the cash balances of the government (which lies with RBI), the surplus liquidity with banks has come down to just above Rs 1 lakh crore (Rs 1 trillion)," wrote Samiran Chakraborty. The negative real interest rate means that growth of deposits in banks is 9% while credit growth is 16%. Banks will be forced to increase lending rates. The RBI has sold $114 billion which has sucked out Rs 9.427 trillion from the system at an exchange rate of Rs 82.7 to the dollar. xe.com. So, we have lost dollars, lending rates will rise, the rupee will fall and inflation will rise higher. Well done RBI.