Back in 2003, the first time the rupee bounced up from almost-50, I made a forecast that the rupee would be 38 to the dollar in five years. It almost came true - close but no cigar, as they say, and no billboard on Marine Drive.

Undaunted, however, and inspired by Tennyson's famous poem that goes (in part), If at first you don't succeed, try, try again, I'd like to try again. So, here goes - could the rupee be 38 to the dollar in five years?

As before, I am sure a lot of people will think I am crazy. But let me take inspiration from my father who used to often quote me Kipling: If you can keep you head when all around you are losing theirs.., then you are a man, my son.

Well, right now all around me are certainly losing their heads, and, more painfully, their wallets, their jobs, and in some cases, even their lives. But let us try and be objective - keep our heads, as Mr Kipling suggested.

Six months ago, the rupee was around 40, and even at that level most exporters were expecting to be quite competitive. It wasn't going to be easy, of course, particularly given the bad derivative deals struck when the rupee looked like it was going straight � yes - to 38 and beyond. But, once it turned back from 39.30, export growth of 20-plus per cent seemed a done deal.

Of course, six months - particularly these last six months - is a long time. Global markets are in completely uncharted waters and, to reiterate, all around are losing their heads. Most businesses are in disarray, as a result of which sales are getting very difficult, buyers are placing small orders on a month-to-month basis, and credit is extremely hard to get, and expensive when it is available.

The rupee has fallen like a stone, hitting 50, as the global credit crisis has everyone scrambling for cash dollars to buy US Treasuries - not a flight to safety, but a flight to liquidity.

Dalal Street [Get Quote] has tanked falling nearly 60 per cent since the start of October, as FIIs are selling to shore up parent balance sheets and hedge funds are dumping stocks everywhere to meet redemptions. The RBI has been on full alert, selling dollars from its reserves, and cutting the CRR and the repo rate to limit the impact on domestic liquidity.

While it appears a meltdown of the rupee has been averted, we have to brace ourselves for the impact on the real economy. The downside is obvious - dramatically lower sales. But, as always, I believe we need to look at - and plan for - the positives. First of all, the dramatic dollar strength has knocked out many of the worst derivative deals, removing one serious pressure point on exporter balance sheets.

Secondly, inflation - whether raw material costs, or, so critical for service industries, people costs - has started coming down. And let's recognise that what we have seen so far is just the beginning.

So, while companies may not be able to meet the 20-plus export growth target in 2009-10, there is little doubt that they would be able to retain - perhaps increase - their margins, with the rupee at a hugely attractive 50 to the dollar.

Indeed, at this level, our exports should be super-competitive, even against China - the yuan has appreciated by 35 per cent (!!!) against the rupee since the start of the year - providing Indian companies an opportunity to increase market share in several industries, particularly as higher capacities are already in place.

Granted, amortising these capacities will be expensive in today's environment. I believe the RBI needs to earmark $50 billion or so from the reserves as a facility for banks to rollover dollar borrowings by their constituents.

This would address the intense pressure on dollar demand, just as has the reopening the window for oil importers. While reserves have been drawn down a bit (about $38 billion, a bit over 12 per cent), the truth is that we have sufficient reserves to make an even larger allocation, and, in any case, this is what the reserves are for - to use in an emergency.

The RBI could also float a large NRI bond issue, and there is some talk of this already. Properly marketed, we could likely raise $15-20 billion - the last issue, which was quite successful, raised $5 billion, and both India's credibility and the amounts of money looking for a reasonably safe home have grown in time.

All (or even some of) this will certainly turn the tide on the rupee, whether it slips a bit more in the immediate term or not. However, it is hard to see any real strength since capital inflows, which were the prime mover of rupee appreciation, will take some time to return - today, and for at least a year, investors will stay in cash and close to home. Risk aversion rather than returns will be the driving mantra.

Nonetheless, when the smoke clears - and one day it will - the India story will look even better than it did over the past few years.

Let's remember that five years is a long time. Back in 2003, 38 in five years sounded like a weird dream. Given that it almost came true, it shouldn't sound as weird today.