These currency movements offset the trade deficit by eventually bringing all of the dollars home.

FORBES: Is 95% of the Trade Imbalance Legal Tax Evasion?

India also needs to keep rates high enough to attract foreign capital and offset the current account deficit, in order to keep the rupee from weakening and making inflation worse.

WSJ: India Central Bank Cuts Lending Rate

India also needs to keep rates high enough to attract foreign capital and offset the current-account deficit, in order to keep the rupee from weakening and making inflation worse.

WSJ: India Central Bank Cuts Lending Rate