REER, real rates, growth differentials.
REER undervaluation of 5.63% (92.72 vs 98.25 long-term mean) — mean-reversion force
Real rate differential of +1.725% in favour of India
Growth differential +4.5% (India 6.9% vs US 2.4%)
REER mean-reverts toward 98.25 with a compressed 2-3 year half-life.
Compressed 2-3yr REER half-life ignores decades of RBI blocking appreciation.
RBI actively intervenes to prevent INR strengthening below 90.