Thanks to huge inward remittances of dollars, there is pressure on Rupee to appreciate. RBI has been trying to control this appreciation by buying dollars from the market. This in turn is creating inflationary pressure. The reason RBI doesn't want a stronger rupee is that it is bad for exporters. Everyone seems to take it for granted that a stronger rupee is bad for exporters. But, does it have to be so?
Let's take the IT industry. Let's say rupee goes from 40 a dollar to 30 a dollar. It doesn't mean the IT services companies have "lose their competitiveness". They can keep the billing rate at the current levels and still make profit - by cutting costs. Reduce salaries to account for the rising Rupee - other costs like travel etc will go down anyway as they are linked to dollar rate. A 20-30% reduction in salary for IT folks only means they are back to last year's salary levels in rupee terms - hardly makes a dent. Especially, if rupee is at 30 a dollar, petrol and all other imports will be much cheaper bringing down inflation - so your salary may be lower numerically, but in terms of purchasing power you are no worse off.
So, why not let the rupee appreciate to its true value? Why keep it artificially down in the process taxing all the citizens in the form of higher inflation?
Update: A ToI article supports the view with this sentence: "But many feel the focus has to be on cost control, and especially salary cost, which is by far the biggest component — about 40 per cent of total cost."