India's Depreciating Currency: Why the Panic? (by: Paul Krugman)

http://www.truth-out.org/opinion/item/18621-indias-depreciating-currency-why-the-panic

 

We more or less know the story here. First, advanced countries plunged into a prolonged slump, leading to very low interest rates; capital flooded into emerging markets, causing currency appreciation (or, in the case of China, real appreciation via inflation). Then markets began to realize that they had overshot, and hints of recovery in advanced countries led to a rise in long-term rates, and down we went. (I don't think quantitative easing has much to do with it, although your mileage may vary.)

So the recent decline is sharp. But should India panic?

This would be scary if India was like the Asian crisis countries of 1997-1998 or Argentina in 2001, with large amounts of debt denominated in foreign currency. But unless I'm misreading the data, it is not.