Over the last year and a half, the real value of the rupee has been going up. Neither the government in its budget or otherwise, nor the RBI, seems to be concerned about the deleterious effects of the same on export growth. Both government and the RBI plan to strive for capital account convertibility, even at the cost of export growth and growth in general. The argument that capital flight takes place anyway, so that capital convertibility should not affect it, is fallacious. Growth is the key to surplus retention, and the recognition of significant capital flight from India would mean that policies would have to be directed not only to attracting capital from abroad (FDI, portfolio investments) but also for surplus retention. Only high growth can ensure that the incoming capital does not merely lead to displacement of domestic surpluses (capital flight) in investment, but adds to domestic savings to raise the overall level of savings and investment. Expansion of exports especially of those that arise in small firms, is a near perfect answer to raising the overall growth rate. A significant depreciation of the currency, besides enhanced credit through a major reform of the banking sector would be necessary. On structural considerations, there is no getting away from exports' inevitable role as the engine for India's industrial transformation.