While writing this column on Friday at around 9.30 A.M., the Indian rupee (INR) was trading at 69.01 against US Dollar. The currency had closed at 68.90 previous day (Thursday).
The Indian rupee has been witnessing fall against the dollar ever since the beginning of this year. On January 1 this year, the rupee started at above 66 level and since then it is losing value against the US Dollar. In percentage terms, the rupee has weakened 7.30%. If currency experts are to be believed, the fall to 70/dollar levels during this year would be a reality.
The falling grace of Indian rupee is a noteworthy component in the four-year performance report of NDA government at the centre led by most powerful Prime Minister Narendra Modi. During 2014 Lok Sabha election campaigns Modi vehemently attacked the United Progressive Alliance government led by Congress in the context of falling value of the rupee – which at that time was hovering between Rs 56 and Rs 62 for a dollar. Ironically, during the four years of NDA rule, the rupee continued to fall from grace and is fast going to hit 70 against a dollar. As stated above, it has already crashed to an all-time low at Rs 69.10 to the dollar.
Weakening of rupee has been adversely impacting common man's financial planning. From essential commodities to the glamorous gadgets, the loss of value which the rupee is witnessing has been hurting them in many ways. Since the country is dependent on import of crude oil (almost 80% of the oil is imported), a falling rupee has pushed oil prices to a four-year high. This triggers higher inflation and mounting more economic stress on the common man.
If we dig a bit further into the dollar dominance scenario, we find host of economic problems engulfing the economy. Foreign Institutional Investors (FIIs), who have had a very important role in the Indian stock market, are leaving the country. As FIIs are taking flight from Indian markets, who reportedly have so far withdrawn $6.7 billion from India's market between April 1 and June 4, it put pressure on the value of the rupee against the dollar. At the beginning of April 2018, one dollar was worth Rs 65. By July 06, 2018, it touched all time low of Rs 69.10. Notably, the falling rupee can further trigger FIIs to sell their stocks, which can result in a further fall of the rupee.
We have also witnessed sluggish job creation during the past four years. It's worth mentioning that agriculture sector, which is our largest employer, has been witnessing slow growth during this period. Some experts even suggest that the agriculture sector is in crisis.
The termite in non-performing assets (NPAs) in Indian banking industry is among the bumps witnessed by the Indian economy. The level of gross NPAs (bad debts) of scheduled commercial banks is expected to rise to 12.2% in March 2019. It was 11.6% in March 2018.
In 2016, the government demonetized all high-value currency notes, which constituted 86% of all currency in circulation. It was followed by a new tax regime: the goods and services tax (GST). Both moves shook the Indian economy with even small businesses getting affected.
The falling rupee scenario suggests that the government is banking upon luck as far as getting the economy back on track is concerned. So far it's bad luck for the common masses, as they ultimately have been bearing the brunt of falling rupee. For example, the prices of goods transported from one place to another are bound to rise further and the consumers have to bear the rising cost. The companies involved in production of fast moving consumer goods too will revise the prices of their commodities to insulate against losses.
Falling rupee has put the students undergoing trainings in different countries in a precarious situation. They being in the middle of their studies have to bearing the brunt of the falling rupee.
Precisely, it's only the common man who does not a role in the downfall of the rupee against the dollar. Weakening of the rupee is a symptom of the decaying economy. The scenario is worrisome.
(The views are of the author & not the Institution he works for)