No more weighty for 80 as the Indian rupee fell to Rs 80 to USD 1 yesterday. An expert on the fall, alarmist predictions and keeping the faith
The rupee has been a victim of higher energy prices and the uncertainty surrounding the global economy. Representation pic
The doom and gloom that marked the fall of the rupee, all through this fortnight, deepened as our currency depreciated, breaching the Rs 80 for one US dollar mark on Tuesday. The rupee has been in free fall for a while now, but ‘80’ was seen as some sort of a psychological barrier, “when the rupee touches 80” was the talk through the past few days.
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There is naturally the common man’s angst and experts are rolling out analyses as the immediate fallout of this. Looking at the development holistically, I must point out that there are other currencies too depreciating against the dollar. The Euro and the dollar are on par right now.
Price zoom
The impact of the falling rupee is not good for the country. We are an import-driven country, where our imports are more than our exports. As the oil prices go up, it has a domino effect on all goods. Your transport goes up, so the common man ends up paying more for most products, including electricity bills. While our imports are in the 600-billion range, our exports are approximately 400 billion.
India has significant strength and that is why there is no reason for the rupee to fall to this extent. Currently, India is stronger economy-wise than the USA. This is the reason why the USA is increasing its interest rates to attract capital. Today, we are all so well connected that we are truly a global world, so if somebody sneezes somewhere, somebody else gets a cold. Somebody’s action of increasing interest rates to attract capital should not be seen as somebody else’s weakness.
I think the rupee will continue to depreciate against the dollar every year as historically it has always been so. The rupee may not depreciate for a year or two but it eventually will. Parents who have to pay for their children going to study in the USA, do know the rupee will depreciate, they are mentally prepared.
These have been extraordinarily challenging times, driving inflation to record highs. The Ukraine-Russia war, commodity prices going through the roof, the freight and shipping costs, all these combined have sent prices zooming. Yet, I see our large domestic consumption and youth-centric economy, and I believe India will not just survive, it will thrive.
Sri Lanka?
I am often asked whether we will go the Sri Lanka way spinning into the same downfall as our neighbour, but you just cannot compare the two economies. We have 600 billion dollars as reserves. We have more than 12 months’ reserves for imports and India’s balance sheet is strong. We have no virtual external borrowing. We have 620 billion dollars as foreign debt. Out of this, we have 500 billion dollars as long-term debt and 120 billion dollars as short-term debt. There is no significant debt of the government. There is no flight of capital. We also have 80 billion dollars from Non-Resident Indian (NRI) remittances.
The India story is one of power and progress. Do see that though the rupee has depreciated, it has strengthened against several other currencies like the British pound, Japanese yen and the Euro. There are projections of a 30 trillion-dollar economy in 25 to 30 years. I see these as markers of tremendous progress. The dollar@80 is a subject of television debates and dinner table conversation. Yet, rest assured that the India Shining story still has sheen.
As told to Hemal Ashar
(The columnist is president, IMC Chamber of Commerce and Industry)
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