India has flattered to deceive more often than not on the economic front and this time was no different. With the desired policies not on the anvil, the rupee will continue to fall or abate slightly but appreciation seems a far-off. A year to go for the General Elections 2014, economic policies would be the last thing on the minds of the government. With so many allies to answer to, arriving on a consensus on policies which are harsh in the short-term but good long-term is extremely tough. The focus will be on cobbling their allies to stick together during times when there will be heavy horse-trading. The government and the bureaucracy will go in auto-pilot mode with no major reforms allowed to go through.
Increasing interest rates too cannot be an option because the domestic industry has been calling for reductions from the Reserve Bank of India to facilitate growth. Interventions by the central bank in currency markets will be a temporary balm. It cannot be sustained. Thus they too have been wary of meddling with the markets. Good economic outlook in US/Europe, coupled with lack of reforms and significant energy increases - all these factors are heavily against the rupee strengthening anytime soon. It might recover about a percentage point or two but to levels about a year back seem improbable.