ktmValleyBoy, seems that you're a novice in economic anlysis. Currency devaluation is good for exports but is partly responsible for inflation and in the case of a peg being removed (ala ARS against the USD back in Jan 2002) the inflation could shoot up 50 - 70% overnight. And real GDP will "go down" as in the case of Argentina, my friend! Why do you think the ARS peg on the USD fall through? The major reason was the defference and the imbalance of the 2 economies. The US had just coming off the dot com boom, had a half trillion+ trade surplus, had major foreign direct investments coming through and US exports (mainly defense) was still vehemently chugging along. No wonder, the demand for the USD as always, looked strong (healthy economic data too helped here). In comparison the stagnant Argentinian economy defaulted on its intl debt and didn't have show any sings of coming back for years down the road. The Banco Central de la Republica Argentina took all measure to maintain the peg but how long do you think one's Reserve Bank can keep buying their own currency to keep its demand stable? A time comes about when that would be too expensive to continue and the market forces would ultimately prevail (ala Thailand in 1997: 20% crash in a few days, Malaysia, Indonesia and Phillipines 1997...the famous fatwa against George Soros was released then). As I've noticed, pegs are meant to be broken (even China did it in 2005) and the INR/NPR is no different. Agreed a pegged currrecy does give us stability but there are huge costs associated with this. At the current rate of Nepal's developement (or negative development) compared with India's booming economiy there is no way we would be able to sustain it for a long period of time if the current scenario keeps going on for years (it has already). A financial panic is inevitable unless Nepal changes overnight miraculously. Prepare for the worst is all that I'm saying. And, the example of Germany was just that...an example (Pls see the very next line when I said "That, my friend is too dramatic")!! As in my first post, an ARS situation looks more likely for the NPR.