Question
Which of the following exchange regime is followed in
India?Solution
In India. Managed Floating Exchange Rate regime is followed. In Fixed Exchange Rate regime, the exchange rate is fixed to a foreign currency or gold. It is also called Pegged Exchange Rate regime. It is controlled by Central bank of Governent. In Floating Exchange rate regime, there is no control over exchange rate by government or central bank. It is allowed change in response to the prevailing market forces. But in Managed Floating Exchange Rate regime, some degree of control is excercised by central bank. But this intervention is an exception rather than a norm to prevent volatility in exchange rate.
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