Dinesh Kamath's Editorial 'Steps to strengthen the rupee are welcome' that was published in Newsband

Steps to strengthen the rupee are welcome

The rupee is currently the worst-performing currency in Asia. The Union government met the Reserve Bank of India Governor Urjit Patel recently and announced a list of measures to arrest the sharp decline in the currency. These include steps to curb the import of non-essential goods and encourage the export of domestic goods, removing restrictions on foreign portfolio investments and encouraging Indian borrowers to issue rupee-denominated ‘masala bonds’ to facilitate the inflow of dollars and the term limit imposed on borrowings of manufacturing companies is to be shortened further in order to curb dollar demand.

These steps to strengthen the rupee in the short term are welcome. The reasons behind the decline of the rupee are India has been unable to boost exports over the years and it has been unsuccessful in finding sustainable domestic sources of energy to address the over-reliance on oil imports. The government needs to think of a long-term plan to boost exports.

The depreciating rupee is also a symptom of persistently higher domestic inflation in India over many decades. The rupee has lost about 60% of its value in the last 10 years against the dollar. There is need for drastic changes in the style of monetary policy conducted by the RBI. Steps should be taken by the government for removing policy barriers on export and the changes that have to be made by RBI to its monetary policy

The collapse of the rupee, driven by State Profligacy, lack of accountability, incompetence (reservations), extortion (corruption) and government inefficiencies has been going on since 1947. In India, Government employs ten persons to do the job that one competent person can do. Out of these ten persons, nine are dedicated solely to tending meaningless laws and rules designed to harass the ordinary citizen. All ten of them are not only over paid but very highly over paid. This is an enormous burden that has to be borne in terms of taxes, deficit finance and inflation by the economy, thus inflating cost and price.

India is one of the largest importer of oil and with the commissioning on new refineries its requirement will sky rocket. Why India cannot leverage its position to get cheaper oil? Imports of gold and diamonds are a sheer waste of forex earned by techies in IT field.

Twenty five years back ownership of car was not for the middle class. They used to make use of public transport and were content with that. Now everyone wants to own a car. It increases pollution, while also creating drain on foreign exchange. Stop manufacturing cars for private use, and encourage all to use public transport. Improve the public transport network. That will go a long way in saving the Rupee.

An important point is that there is persistently higher inflation in India, hollowing out the value of financial assets. Keeping inflation within 4% would be an act of kindness to all Indian households.