........The dollar has zoomed versus the rupee. That brings the current account deficit (CAD) to centre stage. The Reserve Bank of India (RBI) intervened at least once. It cannot afford to intervene on a regular basis since it must protect its reserves. It is, therefore, extremely likely that the rupee will fall further if FII selling continues, or gains in volumes. Fears of an exploding CAD, and an associated bloat in the fiscal deficit, would be among the key variables D Subbarao considers before announcing the credit policy. The central bank's actions would be primarily designed to stabilise the rupee, rather than to enable growth, or control inflation. Inflation is falling anyway if the latest consumer price index and wholesale price index data are believed. Growth has also picked up a bit, if the index of industrial production is credible............
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