The value of the rupee against that of the US dollar dropped to the lowest-ever on Monday. The dollar was traded at Rs 77.50. This does not redound to the credit of the economy, though it is not an unmitigated disaster as some see it. In the ideal situation, the rupee should have parity with the dollar. That is, if wishes were horses! For those Indians who earn in dollars, the depleted value of the rupee is a blessing for it swells their account books. For the exporters, too, the slide in the value is encouraging. Alas, the exports have been slagging while the import bill has been growing exponentially. The reasons are not far to seek. The international price of crude oil has been increasing on account of the Ukraine war and the sanctions against Russia. There is consequently an increase in the prices of items that India imports like petroleum products and cooking oil. The manufacturing sector is yet to reach its apogee having been hit hard by decisions like demonetisation and the war against Covid-19 in which millions of people lost their jobs. The sudden increase in the value of the dollar vis-a-vis the rupee, is because of the volatility in the US stock exchanges where there is a fear of increase in the US interest rates. The interventions made by the Reserve Bank to keep the rupee from falling have not been adequate, especially when the Asian market has not been stable with China facing an economic crisis, buoyed up by growing Covid cases.
Politicians are bound to needle the government for its failure to keep the rupee stable, against the dollar. That is what the Congress Party’s leaders like Rahul Gandhi did. However, allowance has to be made for the fact that about ten years ago when the rupee lost its value by certain points, the then Gujarat chief minister, Narendra Modi, had famously said, “Today our currency is on its deathbed. It is in the terminal stage and urgently needs the attention of a doctor. At present, both - the rupee and the UPA government — have lost their value”. If anything, it shows how pointless such wrangling over the international money market is. What is needed is a robust economic policy that encourages exports and reduces both imports and inflation so that there is no depletion in the foreign exchange reserves.