A proper assessment of our external competitiveness with respect to our major trading partners by examining a variety of indicators will shed some light over some of the present policy implications of dealing with an appreciating rupee. What is meant by the competitiveness of an economy?The concepts of competitiveness are the short-run versus long-run view of competitiveness and price versus non-price measures of competitiveness. The commonly used measures of competitiveness are multilateral or nominal effective exchange rate (NEER), real exchange rates and real effective exchange rate (REER). In the long run, competitiveness reflects the ability of an economy to improve living standards.
