15:44 July 10, 2012
“The whole thing is that ki bhaiya sabse bada rupaiya” goes a famous Mehmood song from a yesteryear film. Going by the rupee’s incessant fall in recent times, we need to tweak it to “The whole thing is that ki bhaiya kitna gira rupaiya”
Many, not surprisingly, are diametrically divided on their analysis of the rupee’s continuing fall. Some solely blame the government’s slow pace of reforms. Others find the loophole in our regressive policies that defy the ever-changing needs of ever-changing times. Then there are those who find the trouble brewing in far-off Europe to be the principle cause behind a huge fund shift happening in favour of the time-tested dollar. Many of these pessimists foresee the rupee at a dismal Rs 62 in the coming time.
There’s no dearth of optimists either. One of the renowned international institutions still has humungous faith in the Indian economy. They predict a gradual bounce back in a year’s time with the expected pick up in overseas borrowings. Their rosy forecast puts the Indian Rupee at Rs 46.9 in 12 months.
Others are more cautious in their optimism. They see the fall as a normal setback to the emerging markets. At the same time, they are not comfortable with the Indian government’s ambiguity over crucial policy decisions.
Last but not the least, there is a minority wing of thinkers who don’t attach any particularly good or bad repercussions to the currency downslide. Instead, they call it a pure play of demand and supply that only ‘right sizes’ a currency in foreign exchange markets in line with the prevailing circumstances.
Notwithstanding all arguments and counter arguments, few things are clear and evident and you don’t have to be an economist to gauge them right:
- That we, as a nation, spend a hell of a lot on our ministers, irrespective of the economic situation – whether their travel, staff, security, health or amenities. And this tribe is wholly austerity-proof by default and design both.
- That our bureaucracy is needlessly large and largely inefficient in the same breath.
- That any possibility of our trade deficit coming down rests not on concrete boosts like rise in exports but external factors like likely fall in global crude oil prices or governmental mechanisms like gold import curbs.
- That all these years, we liberalized imports feeling secure about funding trade deficits with hot foreign money inflows, which have now dried up.
- That India’s much publicized “Safe haven for foreign investment” campaign has suffered a big blow with many of the government’s backsliding judgments like the Vodafone case, denying FDI in retail and the telecom license fiasco.
- That the monster of inflation is set to grow even bigger aided by a host of other factors like rampant corruption, manufacturing slump and the growing burden of mindless public spending, overdone protectionist policies and perennial sick units.
- Like the system of Ayurveda, we need to attack the root cause, not merely look to treat the symptoms. More often than not, it pays to overhaul our lopsided views on events and developments, more so in their analysis that follows in hindsight. So, in the mad rush to scrutinize the rupee’s ongoing fall as also predict its rollicking journey ahead, it’s prudent to single out the obvious from the intricate.