Dinesh Kamath's Editorial 'The weakening rupee is worrying the Indians' that was published in Newsband

The weakening rupee is worrying the Indians

It is time to boost exports. The currency, which was valued at 63.84 to the dollar at the end of 2017, briefly crossed the 70-mark in early trading on Tuesday, on account of the fall in the Turkish lira. The lira has slipped 40% against the U.S. dollar this year. Relations between the U.S. and Turkey are tense.

The crash of the lira has had a ripple effect on most emerging market currencies, catching policy-makers off guard. In contrast, the rupee’s fall from about ₹68.5 to ₹70 appears minor.

The Indian currency has been fairly stable over 2016 and 2017; with inflation being higher than in developed countries, its purchasing power at home has been falling.

The rupee’s correct value may be closer to 70-71 to the dollar, and achieving that level will boost job-creating sectors like exports that have severely underperformed in recent years. In addition, with foreign exchange reserves currently around $400 billion, India is comfortably placed.

The Reserve Bank of India may have room to hold off on a growth-debilitating rate hike in October. India is better-placed than most other emerging economies.  

In order to nullify the US aggressive sanctions and weakening of currency the developing nation like India should embrace common currency with other developing /developed nations. BRICS, SAARC & gulf countries too should embrace common currency like European Union and develop a path to One World! One Currency!! through IMF or World Bank. It seems to be impractical but it will stop the high handedness of the Big Boss US!

While weakening of rupee is a negative indicator in many ways, it can be positively used to obtain dollars through exporting Indian goods.

Indeed the fall of lira is unfortunate caused by the strained relationship between Turkey and US caused by Trump's extreme conservatism over American wealth.The big boss is now highly ferocious in taking thunderbolt decisions on business,economic and socio spheres affecting the entire world including the developed country like China. India is also affected by the Trump Tempest by facing import tariff and capital flight caused by fed hike. Increasing oil bill and resultant hike in CAD, dwindling exports, reducing foreign exchange reserve cause the sliding rupee. India needs strong governance to extricate from the grip of these deep rooted problems.

There must have been a sense of relief in the RBI that Turkey pushed the rupee beyond the psychological barrier of 70, something it has used a lot of dollars from its reserves to prevent. It should let the currency find its sustainable level amidst so much global volatility. India’s exports are range bound; not sure if a weaker rupee alone will help increase them.