In a rare move, noted economist and Chairman of the 16th Finance Commission Arvind Panagariya warned the RBI against allowing the fear of the rupee crossing 100-per-dollar mark dictate policy response.Panagariya, the former vice-chairman of the NITI Aayog, today said, “Dear RBI, do not let the psychology of Rs 100 per dollar determine your policy response. 100 is just a number, like 99 and 101. Whether the oil shortage is short-lived or long-lived, the right response at this moment is to let the rupee depreciate.”Panagariya argued his point building possible scenarios amid the ongoing West Asia war.“Suppose oil shortage is short-lived (3 months to a year) — the rupee will depreciate now but will substantially recover once the oil-import bill shrinks and foreign capital seeks Indian investments precisely to take advantage of the “cheap” rupee.In the scenario of oil shortage being long-lasting (One to an unknown number of years), a resort to anything other than depreciation will be a losing proposition, said the economist.He said trying to defend the rupee will continue to bleed the reserves until they are exhausted.“Nor would the dollar-denominated bonds or high-interest dollar-denominated NRI deposits turn out to be more than a band-aid. Eventually, you will have to cross the 100-rupee-per-dollar psychological barrier,” he told RBI.Panagariya added that this is not 2013 when inflation was in the double digits.“Thanks to your prudent monetary management, that is not the case now. Therefore, the economy is well-positioned to absorb some inflationary pressure that will accompany the depreciation,” he said.The Finance Commission chief said dollar-denominated bonds and high-interest NRI dollar deposits are costly instruments that pay significantly higher interest than the rate India earns on its own foreign-currency reserves.It is largely a transfer to rich NRIs, he said.