Question

Under ISI exchange rates were overvalued. What is the primary reason that exchange rates were overvalued under ISI?

Answer 1

Primary reasons for over valuation of ISI exchange rates were:-

• Over valued Exchange helps in reducing inflation pressure.
• With ISI, the state could continue the promotion of secondary industrialization with high Tariffs
• Selective substitution of capital.
• Overvalued exchange rates.
• To support domestic production.
• To produce growth in various sectors.
• Create Export growth and support for liberalization.
• To make the countries Exports relatively expensive.
• Make cheaper Imports.
• Over valued Exchange rate depresses dometic demand.
• Improves spending on Imports.