Dollars bought by the Central Bank creates is taken out of the market and instead rupees are created in the economy, weakening the currency peg.
In money markets overnight repo rates were at 9.60/70 percent levels and un-backed call money was quoted around 10.50/60 percent dealers said.
Fiscal management is a must now, with lower subsidies and supply of inflowing dollars into the market rather than reserves. This is in the interest of the Central Bank as well, as they have to service their dollar denominated loans, and a weak rupee makes this untenable.
The lower than expected interest rate offered for the $1b bond, and the ten times oversubscription bodes well. Fussbudget, hope another article is forthcoming.
May be we should be a little more cautious in forming opinions...
'If' and 'assuming' are for economist. Fact of matter is, you have a huge trade and budget deficit which is not easy to correct with the kind and speed of reforms you implement.