Dinesh Kamath's Editorial 'Why is the value of Rupee eroding?' that was published in Newsband

Why is the value of Rupee eroding?

The value of Indian rupee continues to worsen. Why? There are domestic factors that seem to be working against the rupee. Trade data

shows acceleration in exports and a significant fall in imports; if these trends continue, the value of rupee will worsen still more.  

It’s government’s illogical policies/pressures that have troubled the Indian economy and has sent us in a state of fix. We are facing stagflation today. If we try to rectify inflation then stagnation worsens and vice versa.

RBI governor tried to control inflation but under the pressure of the government he had to decrease marginal standing facility to help the business houses raise cheap loans so that they may reap more profits by selling more products to consumers.

Can Inflation be ever controlled by these dubious moves? The swing in its value has made investors from abroad to think twice when investing in India.

Rupee slide is detrimental to Indian economy as we import more than we export - especially oil imports, which is the key to inflation, will be dearer due to rupee slide. RBI has to take strict measures to control the stability of rupee which is key to keep the interest rates, inflation and economic instability under control. As election is round the corner, high volatility of prices, rupee and stock market may lead to a volatile marketplace both economically, financially and politically. UPA and RBI should focus on limiting current account deficit, trade deficit and managing financial instrument diligently to make a significant impression rather than looking for last few pennies to make before they

give away power.

Rupee will rebound after the elections. But the future will not be bright because of the structural faults. The structural faults are related to high corruption, lack of discipline, ignorance, poor governance, and lack of unity within the nation. The environment in India is not conducive to fix these structural faults. They still look to the West for approval of their performance and this lack of confidence is a result of the above stated structural faults. A strong and honest government is needed to fix these structural faults.

The Rupee has been weakening ever since the country attained independence in 1947. One had to pay Rs. 4.50 to a Dollar to buy an air ticket to the USA in 1966. Today, the price of an air ticket to the USA is almost the same in Dollars but, in Rupee terms, it is 15 times what it was in 1966. China is manipulating its currency exchange rate to prevent Yuan from appreciating. Here we are struggling to keep INR from depreciating. What a contrast!

Fall of rupee against dollar is matter a of serious concern for a parent

whose son/daughter studying abroad with meager scholarship and need

support from India. Fall of every rupee affects those parents who live on

a fixed monthly salary, though some exporters may be celebrating the weakening rupee.

Successive governments’ misplaced priorities have had their share of influence on eroding the value of Rupee. We need to concentrate more on Primary Sector (Agriculture and allied services) to bring about a structural change in economy. The government must take steps to make agriculture a profitable proposition.

India should try to reduce excessive dependence on Foreign Institutional Investors funds and encourage domestic savings and investments as foreign funds will always be highly volatile depending on world’s economic climate

This is the only way forward to improve our economy and instill the faith in our currency.