Majoritarian view: Falling Rupee- value not a cause of concern.
- Martin F.R.
Source Credit: Google
The value of Indian Rupees has been falling like nine pins in the past few days and has hit a new low of about 73 Rupees/$. The vice- chairman of the think- tank NITI Aayog though says falling rupee isn't a cause of concern because the rupee value has risen about 17% since last three years and it has only fallen 9.8% so it is going back to it's normalcy. He also says " rupee shouldn't be over- valued and rather there must be an equilibrium between demand and supply," on the sidelines of a meeting conducted by NABARAD.
The increase in the value of rupee is also not a good sign of economy and there are a lot of nunaces and calculations that take place before evaluating the economy of a nation.
India also doesn't need to worry about the falling rupee value because the Nation's exports are beginning to rise, the employment is beginning to rise, the agricultural production is growing and lastly the rate of growth is one of the best in the world. Thus there is no immediate need to panic about the depreciating rupee value. This had been the story of major emerging markets and Indian Rupee has been tagged the worst performing currency in Asia because it has lost about 10% since the start of the year.
Other vulnerable currencies that are in danger of loss due to the increase in demand for the US dollar are the Argentine Peso, South African Rand and Turkish Lira. Argentinian peso had lost about 10% of it's value in about one single day alone. The currencies have suffered because the US federal reserves have increased the Interest in which they lend and the investors who usually invest in the emerging markets now invest in the US expecting a higher return. The demand for the US Dollar has also gone up.
This doesn't mean that the states can keep blaming the external factors for the depreciation of their currencies, one of the main factors of the depreciation of the currency is due to higher domestic inflation. The emerging markets are facing tough situation now when the economic policies of the west have returned to normalcy but they were the same people who enjoyed the benefits when the situation was just the opposite in the West.
The free fall of rupee is also expected put a huge hole in your pocket right from the everyday essentials, to the swanky gadget that you are about to buy or the foreign education etc. India has already been facing high inflation for a year now with the prices of majority of essential commodities increased beyond imagination. Since the demand for US Dollar has increased, the prices of Crude oil, fertilizers, medicines for which India majorly depends upon imports set to increase. Since fuels prices have a heavy bearing on the prices of transportation of goods the prices are bound to increase which will definitely hit the end consumer.
India imports about 70% of it's pulses and oil from abroad. Due to increase in the demand for US dollars the inflation is set to be volatile in the country. All are interconnected and complex. The free fall of rupee has also dented the pockets of students who are studying in the States. Usually they pay their rent in USD by converting their Indian rupees . Since the rupee has fallen significantly, they now have to pay higher rent and fees for studying. The students who have taken a loan for studies are the most hit because they have a specific amount taken from the banks which has to be returned within a specific period.
On the other hand the major exporters of India, the Auto, IT have a reason to cheer because the rising US dollar would increase the Foreign direct investment( FDI) and would boost the Make in India intiative. The competition is all set to increase since many currencies weakened.
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