SavingsTalk.com

Supermanlet

It currently stands at Rs. 39.51 per dollar. 2 days ago, the Economic Times showed how adversely the rising rupee is affecting Indian jobs. Inflation is at a 9 year low (3.0%).<br />

chefCarlo

They can't print the currency unless they have the bullion to back up what is printed!
The currency is a promissory note that the government has the bullion to back it up. Silver, gold, platinum whatever. Unless the nation has a reserve banked to validate the bank notes ( that is what they have printed ) then it comes to fraud, which will eventually lead to the governments downfall.
So that is probably the reason India can't print any more money. They've not enough to back it up in their reserves.

go for broke

because it will increase the rates of things. everything will start becoming expensive.

detox

The two above answers are not correct. The international gold standard was abandoned at the Bretton Woods conference in 1971. NO country's central bank - not a single one - will give you gold in return for your rupee. Today, money runs on the fiat system, i.e., we trust the government to give us one rupee worth of purchasing power for every rupee that we hold. But thats another discussion. As for inflation, that is a possibility, but as you pointed out, 3.0 is a very good place to be, and the government will not mind going up to 4.5 or so by printing money.
But the reason the central bank won't print unlimited amounts of money is because it is against India's principles to control the value of the rupee. India is committed to the free market, which means that the market - and not the central bank - will decide the value of the rupee. Several countries do not hold the same values, most notably China, which controls its yuan at 7.88 to a dollar. Every time the value rises/falls, the central bank intervenes and restores the 7.88:1 ratio. This is a rather unscrupulous thing to do, because it gives China an unfair trade advantage, which is why the US and the EU are constantly asking China to revise its policy.
It should be a matter of great pride that India will not compromise its values just because the going is getting tough. If the rupee is getting disadvantageous to our export market, we will find new ways to be competitive - but we won't cheat and devalue our currency in an unfair manner. Of course, now the rally is happening too fast, so the government will eventually have to sell rupees in the market to devalue it (to maintain economic stability, more than appeasing exporters). But at least, for a developing country, given all its problems and its need for economic growth, India is quite commited to its ideals.