Dinesh Kamath's Editorial 'Slide of the currency is a big problem' that was published in Newsband

Slide of the currency is a big problem

India is grappling with the rupee’s slide. The currency sunk to a closing low of 68.07 against the U.S. dollar on Tuesday, its lowest level in 16 months, before recovering slightly the next day. Rupee, which is one of the worst performing Asian currencies, has now weakened 6.2% in 2018.

The reasons for the slide are rise in crude oil prices, rising geopolitical tensions in West Asia and dwindling global supply. All these have hurt the rupee. The tightening of U.S. monetary policy has almost always spelled trouble for emerging market economies hooked to Western capital inflows. The U.S. Federal Reserve has come to adopt a more hawkish stance, investors in search of higher risk-adjusted yields have started to pull money out of emerging markets.

India is better placed than countries such as Argentina or Turkey. But that’s no reason to be complacent. A hike in the RBI’s benchmark interest rates could stem the capital exodus. The RBI has an unenviable dilemma on its hands. Policymakers will have to find means to spur exports — whether by facilitating swifter GST refunds or taking on tariff and non-tariff barriers from the developed world.

The rupee slide is a reflection of sagging economy and is a cause of concern. The present policies including GST must have contributed to the failure of economic growth and development.

The slide of the Indian Rupee makes it possible for NRIs to send more rupees to India for the same number of dollars. That is one thing the BJP Government could tell Indians to help them to look at the brighter side of things, especially in this pre-General elections year.

A nation's "worth" is not just GDP, but sum-total of Value Additions that include Human Resource as the highest. India now gives almost Zero attention to human resource value addition, and nearly all our Best Brain Power are "hired"/taken over by American/UK-based and other European/West Asian (etc) nations - thereby India losing Brain power. It is high time India/ our society understand that one Satya Nadella/ Sundar Pichai/Indrani Nooyi/Dr Raghuram Rajan (and many other such "Brains") working as CEO's etc of US/European based multinationals cannot make India. Let us also understand that given opportunity by India to such Brain-Power to develop and create Value Additions within India, India's GDP would automatically grow even three-four or five-fold from the present $2.8 trillion. India has some of the greatest volumes of ALL Resources - valued over $500 trillion - not even 0.5% currently utilized and converted. Let us work with Long-Term view, and Rupee value will automatically rise

Rate increases are now more likely than rate cuts. It would not be unfair to say that the only positive for the economy in the last four years was the fortuitous fall in oil and commodity prices, which is now reversing quite strongly. Amidst all the attention being lavished on the election cycle, time for some wise helming of the economy.

International relations are affecting Indian markets very swiftly. At present increase in price of crude oil has also worsened rupee value much more. It may get worse if America makes sanctions on Iran. This is presently under consideration of US president Trump. So government and RBI need to act smartly and swiftly at present.