themselves into a corner."
To be fair to the central bank, the country's balance of payments problems are beyond its control.
India has historically been a capital-starved economy, with imports and foreign debt servicing bills that far exceed revenues. Capricious governments have done little to ensure a steady stream of foreign investment flows, and India remains one of the most difficult countries in which to do business.
No wonder, critics say, that the current account deficit has blown out to a record 4.8 percent of gross domestic product, or about $88 billion, in an economy whose growth has slowed to a decade low of 5 percent and where consumer inflation is nearly 10 percent.
"Yes, exchange rate stability is the focus now in the short-term," said a central bank official, declining to be named as he was not authorised to speak to the media. "But that is because, in the long-term, we want to protect growth for which we have to focus on the exchange rate in the short-term."
That view point was backed up by India's chief economic adviser, Raghuram Rajan, who told a television channel on Thursday that policy measures were geared to stabilising the currency with "minimal damage" to growth.
Tasked with controlling inflation, keeping the economy growing and ensuring financial stability, plus the pressure of pleasing its political masters, it is often of no surprise that the RBI makes growth a priority.
Even though rates were raised 13 times between 2009 and 2011, economists often felt the RBI was behind the curve and allowed prices to stay too high for too long.
Likewise, while the RBI raised rates to defend the rupee during periods of turmoil in 1998, 2000, 2008 and 2011, the policy tightening was often quickly reversed within two to six months, analysts said.
This time, the central bank is in more of a bind than normal. With currency reserves falling rapidly - at $280 billion they cover just 7 months of imports - and external debt worth $172 billion, a fast-slipping currency could eventually risk financial stability.
Yet, raising its 7.25 percent overnight repo rate would be politically difficult as the ruling