(a) What is the objective of exchange rate management? Do you think that the present regime of exchange rate management has been…

Exchange-rate management The objective of exchange-rate management is to keep the external sector stable without sacrificing macroeconomic adjustment. It seeks price stability by preventing disorderly rupee moves that feed inflation; competitiveness by avoiding persistent overvaluation or depreciation; reserve adequacy by maintaining buffers against balance-of-payments shocks; and crisis prevention by reducing vulnerability to sudden capital-flow reversals. India’s present regime is a managed float: after LERMS in 1992 and unification of the exchange rate in March 1993, the RBI has allowed the rupee to be market-determined while intervening to smooth excessive volatility.

Reserve accumulation has been broadly satisfactory. Reserves have risen to about $600 billion, giving import cover well above the traditional three-month benchmark and comfortable short-term external debt coverage. Under the IMF’s Assessing Reserve Adequacy framework, India’s reserves-to-ARA metric has generally been at or above the upper bound in recent years, indicating a strong buffer. This helped India weather the 2008 crisis, 2013 taper tantrum, and 2020 pandemic without a balance-of-payments emergency.

Critically, RBI’s interventions have not been a simple accumulation strategy. It has used open-market forex operations, verbal guidance, and the Liquidity Adjustment Facility to influence rates and capital flows; forex swaps have managed liquidity. Large reserve accumulation has costs: opportunity cost, sterilisation costs when domestic liquidity is absorbed, and quasi-fiscal balance-sheet effects. Adequacy is not only a stock measure. Capital-account vulnerability, external commercial borrowings, portfolio outflows, and global dollar strength can make even large reserves less protective if not backed by fiscal discipline and flexible policy. Thus the regime has been satisfactory in building reserves, but success depends on prudent intervention, transparent communication, and avoiding excessive dependence on reserves as a shock absorber.

Skill Development and Entrepreneurship The National Policy for Skill Development and Entrepreneurship, 2015, sought to make India’s workforce industry-ready and promote self-employment. Its main features include the institutional architecture of Skill India, the National Skill Development Mission, and Sector Skill Councils to set industry-specific standards. It introduced the National Skill Qualification Framework for a common ladder of skills and credentials. The policy promoted apprenticeship as a bridge between training and employment, with later reforms such as the National Apprenticeship Promotion Scheme, 2016, operationalising the thrust. It also launched the Pradhan Mantri Kaushal Vikas Yojana for targeted training and certification. Entrepreneurship was treated as a parallel objective, with support for incubation, mentoring, and linkage with Startup India, so that skill development would create wage employment and new enterprises.

GATS The main purpose of the General Agreement on Trade in Services is to provide a multilateral framework for progressive liberalisation of services trade, with transparency, non-discrimination through MFN, and predictable rules. It covers twelve service sectors: business services; communication; construction; distribution; education; environment; financial services; health; tourism; recreation, cultural and sports services; transport; and other services not elsewhere classified. Services are supplied in four modes: cross-border supply (Mode 1), such as Indian IT and BPO exports delivered from India; consumption abroad (Mode 2), such as medical tourism where foreign patients come to India; commercial presence (Mode 3), such as TCS or Infosys setting up offices abroad; and presence of natural persons (Mode 4), such as Indian software engineers working temporarily in foreign firms. GATS commitments on market access and national treatment are sector-specific and negotiated, not automatic across all services.

Taken together, exchange-rate stability, skill competitiveness, and services-trade openness are linked. A stable rupee and adequate reserves support services exports and foreign investment, while skilled human capital and a credible services-trade framework help India move up the value chain. The way forward is to combine prudent exchange-rate management with skill and entrepreneurship policies that make services globally competitive.