On August 20 I sent a paper on rupee dollar slide to a management journal and I articulated the reasons for the fall of rupee..Again I wrote in the blog a few days back It is just to recap and tell again that when domestic conditions are equally as bad as the geo political and external econmic environment, rupee cannot be expected to behave in a contrarian way.
Although the Turkish crisis was the immediate proximate factors the underlying reasons are many and they are interlinked...To recap, higher and higher international crude oil prices even while the dollar is stronger,widening of current account deficits, exit of foreign investors,US sanctions against Iran, continuing U S protectionist stance which keeps away the exports of emerging markets,Higher inflation in India relative to the rest of the world( thus making the currecy overvalued), have all played havoc with the rupee.
Student friends, a few only are angry and unhappy that I am painting rupee as the worst performing Asian currency and foolishly cite Russian and Brazilian currency as the worst sufferers..The word Asian has escaped from their eye as their thinking process is colured and condioned by the hate politics engendered in the country.
Be that as it may,let me say that RBI has clearly stated that the rupee will be allowed to find its value in the market and intervention will take place only when there is volatility.The only consolation is there has been a great spike in inward remittances from gulf and in 2017 the inflow is $69 billion which is more than the amount sent by non residents of any country..
India has become the laboratory experiment for the cocktail of devaluation and inflation mix..and all our inflation targetting will be tested .
Since all currencies have fallen there is not much room for gaining any extra milege for our exports where as the imports of diverse goods mainly oil will skyrocket and that exchange rate pass through will raise domestic inflation.Already stupid federal government has raised the excise and reaped the revenue gain playing with economics..
will they have some sense in reducing that component drastically to give some relief to the people who have elected this government.
Although the Turkish crisis was the immediate proximate factors the underlying reasons are many and they are interlinked...To recap, higher and higher international crude oil prices even while the dollar is stronger,widening of current account deficits, exit of foreign investors,US sanctions against Iran, continuing U S protectionist stance which keeps away the exports of emerging markets,Higher inflation in India relative to the rest of the world( thus making the currecy overvalued), have all played havoc with the rupee.
Student friends, a few only are angry and unhappy that I am painting rupee as the worst performing Asian currency and foolishly cite Russian and Brazilian currency as the worst sufferers..The word Asian has escaped from their eye as their thinking process is colured and condioned by the hate politics engendered in the country.
Be that as it may,let me say that RBI has clearly stated that the rupee will be allowed to find its value in the market and intervention will take place only when there is volatility.The only consolation is there has been a great spike in inward remittances from gulf and in 2017 the inflow is $69 billion which is more than the amount sent by non residents of any country..
India has become the laboratory experiment for the cocktail of devaluation and inflation mix..and all our inflation targetting will be tested .
Since all currencies have fallen there is not much room for gaining any extra milege for our exports where as the imports of diverse goods mainly oil will skyrocket and that exchange rate pass through will raise domestic inflation.Already stupid federal government has raised the excise and reaped the revenue gain playing with economics..
will they have some sense in reducing that component drastically to give some relief to the people who have elected this government.
No comments:
Post a Comment