New Delhi, May 29 -- India is trying to defend both the rupee and the stock market simultaneously-an expensive ambition for a country running persistent current account and lately, balance-of-payments deficits, especially when much of its forex reserves are rented capital.

Suppose you take a Rs.10 lakh loan from your bank. The cash in your account may look like an asset, but it is still a liability.

That is the best way to understand India's forex reserves: unlike China's earned surpluses, much of them are borrowed liquidity.

True earned reserves come from sustained current account surpluses. India rarely runs one. Our dollars largely come from: foreign portfolio investors (FPIs/FIIs), foreign direct investment (FDI), borrowings, and o...