Explanation: India announced the Liberalized Exchange Rate Mechanism System (LERMS) in the Union Budget 1992–93 and in March 1993 it was operationalized.

• India delinked its currency from the fixed currency system and moved into the era of floating exchange-rate system under it.
• Indian form of exchange rate is known as the ‘dual exchange rate’, one exchange rate of rupee is official and the other is market-driven.
• The market-driven exchange rate shows the actual tendencies of the foreign currency demand and supply in the economy vis-á-vis the domestic currency.
• It is the market-driven exchange rate which affects the official rate and not the other way round.

Source: TMH Ramesh Singh