Going down and down
Of falling Indian Rupee and its implications
The new Indian rupee sign, which was introduced by Government of India on July 15th, 2010, is turning out to be a bad omen for Indian currency. To be specific, since 2011, rupee has depreciated around 40%, 13% of which has fallen since May this year and 5% alone in the month of June. So, from the value of 44 against one USD, it has now touched the all time low by recently crossing 61. Of late, it has been declared as the least performing currency in Asia, which means worse than unstable Pakistan and poor Bangladesh.
Interestingly, not much time has passed when Indian attitude towards American investment was haughty and conceited that they publicly claimed that they do not bother whether US invests in their country or not. The idea of BRICS ( an acronym for emerging economies, Brazil, Russia, India, China & South Africa) being a success story was touching skies. However, since rupee is, literally under attack and is being lynched, irreversibly, at least for the next few months, two cabinet ministers, finance minister P. Chidambaram and Commerce & Industries minister Anand Sharma, on Tuesday, were left with no option but to wear an iron mask and fly to uncle sam with a begging bowl, the phrase, commonly used for Pakistan by Indian politicians. Yes, since Government of India and Reserve bank of India, both seem to have, unsuccessfully, exhausted every option in their kitty, gaining investor confidence from the US was indispensable. Another reason is the US economy which is bouncing back like a leopard that it's current consumer confidence is highest in five years.
Incontrovertibly, the two ministers could not have landed in Washington to repeat what the US already knew, they had to have some attractive offers to entice those who they meet, there. I find it pertinent to mention over here that US investors have been time and again complaining about various bottlenecks in India, which hampered many FDI (Foreign direct investment) opportunities for India. Fortunately, Preferential Market Access (PMA) policy of GoI, wherein foreign companies were, practically, forced to buy 100% of their telecom gears from Indian manufacturers, which involved many security sensitive electronic and telecom equipments, has been almost called off. This move, on the platter of the said two ministers, will make things easy for them when they meet Boeing, Walmart, Lockheed martin and Microsoft heads, the US lawmakers and hold a scheduled key-note address on Thursday at the plenary function of US-India Business council 38th leadership summit. Newspapers like The Times of India have already claimed that this rethinking on PMA policy will send strong signals to American businessmen.
Nevertheless, a common man is more interested in knowing what does all this mean for him. Paradoxically, there are some good consequences of all this mess. India received the world's highest remittance of $55billion in year 2010, which shows the magnanimity of the size of its expatriates. These expats and their families in India have a right celebrate. The exporters who receive money in dollars should also be jubilant. However, many times, their overseas clients seek adjustments in the prices after some time. Also, foreigners who wish to visit India should come as India is really cheap, these days, especially given the political uncertainties in two major tourist destinations of the world- Turkey and Egypt.
The negatives are not tough to guess. The worst hit would be students from India, who are either studying abroad or have taken an admission before May this year and are scheduled to leave soon. High fuel prices (Petrol, Diesel, cooking oil), costlier foreign travel and inflation, especially on FMCG products (as crude oil in involved) and electronics (TV etc & mobile gadgets). My personal forecast, in alignment with many others is that INR might even touch 65 next year, if major breakthroughs are not made in this regard by India to gain investor confidence.
(Mehboob Makhdoomi is an MBA from USA, with a research degree from Britain and is a member of American Marketing Association.)
Lastupdate on : Wed, 17 Jul 2013 21:30:00 Makkah time
Lastupdate on : Wed, 17 Jul 2013 18:30:00 GMT
Lastupdate on : Thu, 18 Jul 2013 00:00:00 IST
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