Dinesh Kamath's Editorial 'The Rupee gets a much-needed boost' that was published in Newsband

The Rupee gets a much-needed boost

The rupee has managed to gain some ground over the last few weeks. It has gained almost 5% from its lowest levels reached in October. This is owing to the uptrend in oil prices this year which lasted till early October. Since then, the rupee has gained against the dollar in tandem with the fall in global crude prices. This is all due to the U.S. having softened its stance against Iran.

Traders said the weakness in the greenback against some currencies overseas and a higher opening of domestic equities supported the rupee. Rising for the eighth straight day, the rupee climbed 39 paise to 70.30 against the US dollar in early trade Monday, as global crude prices slipped below the $60 per barrel mark.

The fall in global crude oil prices comes as a big relief to the Central government, which has faced increasing macroeconomic and political pressure due to rising prices. The ruling party may be pleased with falling oil prices in the run-up to the general elections next year. The Reserve Bank of India will be relieved as it will have to worry less about the rupee and oil-induced inflation.

There is an increase in investor confidence in the Indian economy. It may not be so easy to map what lies ahead for global crude oil prices and the rupee. The December 6 meeting of the Organisation of the Petroleum Exporting Countries might give some idea.

India should capitalise on the relief offered by the fall in oil prices. The ongoing fall and rise of the Indian rupee is, of course, attributable to the fluctuating world oil prices. It has also become a sordid fact that the Indian economy's growth (or decline) is inextricably tied to crude oil prices. India should fervently look for alternative sources of energy so as to reduce dependence on crude oil.

To make the present favourable situation last long, prudent steps must be taken to face any adverse situation in the future immediately. A nation's values would depend on Value Additions of Own Resources - both materials and Human. Dependence of outside resources/technology/engineering would make a nation vulnerable to international trade balance/imbalance. Oil imports of India is to an extent of about 3.2 million barrels per day (values ranging from $190 million to $250 million/ per day) - running to over $70 billion per annum. The Net-energy values of the imported oil works out to about 800 billion KWH per annum. Were we to convert Coal into Green Energy system, through Clean-Technology, about 200 million T of Coal based Oil could completely solve all the Needs of Petroleum imports. And we have 300 billion T of coal, useful for at least 300 years, at current usage rates. It is high time our Government plans for R&D to utilize the huge Coal resources instead of imported Petroleum.