while the emerging markets are fighting, the rupee is slipping..touching 72

The rupee dollar exchange rate has crashed to the threshold figure of 72 and it was expected..The transition from 69 to 72 is so fast for various reasons..The dollar was not only strong but was expected to be strong on the back of clear inflation and interest differentials between the U S and India.given the tight money conditions and expectation of enhanced dollar strength, the exit of portfolia capital was swift and tha outflow of capital accelerated the tendency towards depreciation.

Since RBI knew full well that given the overvaluation of rupee its fall was certain in an atmosphere of dollar strength and it did not opt for any aggressive intervention.The very fact that RBI kept quiet and said the market will find its own level was the pointer that the rupee fall will not be followed by any intervention..It implicitly meant talking down of rupee,though.
It is learnt that a separate window has been opened for meeting the dollar demand for oil imports and that will not directly add to the dollar demand in the market.All said and done heavy imports and sluggish exports do not give much hope that an even balance between demand for foreign exchange and supply can be achieved...

High reserves  give  strength to beat speculation but the way in which the rupee is molested while other emerging markets are fighting causes concern..rising oil price and falling rupee are the double edged weapon tearing the macroeconomic fabric of the nation..
Let us hope that the rupee will stabilize soon

India's cocktail of inflation and devluation mix, an inevitable fallout.

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.

Fall and fall of the rupee:a few explanations for its persistence and RBI knows what it must do

Indian rupee has touched an all time low ..71 per the USD..Since January 2018 it has fallen almost 10%..Thus retaining. its status as the worst performing currency this year ..It is not just rupee that has fallen and almost all the emerging market currencies have got the beating against the the US dollar

.The reasons are not far to seek  .current account deficits in these countries has been widening for quite some time..The rise in international oil price is one of the principal factors pushing up the import cost and causing strain on current account .Despite the fact that the keralites have sent a massive  amount for the repair and rehabilitation of the flood affected home ,the remittances BOP continues to be in trouble..

 In the sluggish world economy, dominated and frustrated by Trump's trade war exports have suffered ..with little  net capital inflow and rising dollar requirements  for oil imports the pressure is on rupee. Furthermore, the tight monetary conditions and expectations of higher interest rate in the US has made dollar stronger.The dollar index which measures the value of dollar against the host of major currencies has registered a rise of nearly 8% since Feb this year..

so the underlying reasons for the fall and fall of rupee is partly domestic, our widening current account deficits and  also due to the exogenous factor namely the strength of dollar on the back of tightening of monetary policy in the U S..In August alone it fell by 3 percent plus.

Going by the estimates of experts in the field the rupee is undervalued even at 71 and hence RBI is not feverish or panicky to arrest the slide if it happens by market forces..But it is keen to contain the volatility..RBI will be active in case the rupee shows the tendency to cross 72 the upper ceiling  as it is perceived to be the danger mark for more intervention..

Thus far there is implicit talking down of rupee and the tune will change as it still slides further.The secular depreciation of rupee is not a surprise to the author  the blog writer ..The worrisome fact is that it will escalate the cost of imports, engender inflation and may not help much on export front as other currencies of emerging markets have fallen .at best it can help maintain the competitiveness And that is the only situation in the hopeless situation...  

Demonetisation was for nothing says,RBI and my forthcoming volume child's guide will educate more about the misplaced concreteness and disguised politics of that magic wand.

RBI has let the cat out of the bag.The August 29 report says that demonetization was for nothing.None of the stated objectives have been realized ..Indeed the costs of demonetization in term of foregone growth, loss of life and loss of jobs, closure of small firms, the distress to farmers migrant labour and so on outweigh the so caled notional benefits promised on November 8 2016 which will go as the blackest day in History to any sensible student of economics.
 At a time when the author of this write up compiling the old notes on this subject which has had a deleterious effect on the entire economy, the news from RBI is telling the obvious..the unprecedented currency reform aimed at flushing out terror /counterfeit money,and unearthing black money held in currency and ushering in less cash economy and so on has been a huge failure but leaving behind many scars and wounds in the economy ..
Pending the publication of the child's guide  to Mr Modi's Demonetization in a few months time it would be in order to place some crude truths about the fall out of this much hyped measure
1)The banned 500 and 1000 rupee notes amounted to Rs15.42 lakh crores.This constituted 86 % of total money supply ..Every single rupee of this amount returned to RBI..wait the missing amount was only a meager 13000 crores.
2)There was a great expectation that at least 3 lakh crores wund not visit RBI and therefore to that extent the liability of the central bank would be reduced and huge amount would be passed on to the federal government as dividend...
 3)But the interesting paradox and a greater irony is that  in 2016-17, the fiscal  year ended june ,the dividend actually paid out was less than half of What RBI  paid out  in the previous year .In absolute term that was Rs 35221 crores less..
4)To replace the old notes the RBI had to incur an expenditure of nearly  nearly 13000 crores .Before demonetization it  had spent some 4000 crores..A huge amount spent with all the real costs to the economy, people firms and so on for what...to get 13000 cores dividend the missing money mentioned earlier.
5)what happened to the objective of flushing out the counterfeit currency notes?Indeed the fake notes have gone up sharply and during the demonetization period 322000  such instances have come to light..
Let me stop here as the battery has to be charged...The economy also needs to be  administered with care and concern and egoistic unilateral self aggrandizement of power will be an economic suicide and already the rupee has given the red signal .It seems the saffron colour is hardly bothered as it is confident that people memory is short and there is no united opposition   

Ruminating over the magic figure of Rupees 70 plus...Paper under publication

Abstract of the paper entitled:The recent rupee dollar slide August 2018.

Right from September 1949 devaluation of rupee(which was a follow up to British devaluation of pound sterling),through June ,6,1966 and july 1991 two stage devaluation of rupee(both necessitated by major economic crisis, the rupee has undergone a secular depreciation in line with economic fundamentals, with occasional  bout of currency appreciation(under the impact of capital flows) which RBI used to  resist for the fear of  losing competitiveness of export sector. For more than three years the rupee has been shuttling between66 and 69 per USD and in mid august 2018 it crashed to historic low of 70 plus close on the heels of massive depreciation of Turkish lira. However  for the fall and fall of rupee besides  hardening of the USD and firming up of oil price, widening of current account deficit, difficult to finance  (as outflow is more than the inflow) is mostly responsible. It is felt by experts  the range 70-72 is the right level .The current  rupee problem is a classic combination 50: 50 interplay between domestic and external  factors –a kind of cocktail .It is time the government realized ,the  dependence on foreign capital for financing CAD , perpetually, is fraught with dangerous consequence especially when the dollar is strong and panic pervades  the world financial markets..

My dear do you know how much I love you and adore you and I will grieve for you and still move on as I have a commitment to read and see the young children grow

Last year  on this day 23 August 2017 you left all of us  on the serene evening when the sun was setting the whole day more precisely the previous 24 hours you did not eat anythig not even a drop of water . nor did you lie down even for a while..you simply sat without any support or sleep..when I was sitting by your side  till mid night and then started dozing off and slept on the cot near you hardly I knew that was the last  night with you  never to return in this birth..At 3 am when I got up you signalled by sign that I shoud go to hall and sleep and the youngest was with you ..

the next day.-your last day  the marginal day by sheer quirk of fate I forgot your pain and i do not cogently remember..good thing was the second one was sensible to take leave  and all the three daughters and three grand children were there to get the vibration from your saintly solitude ,all the time folding your hand to go away...you were particular that the grand children must be at a distance.

In the whole marital life of 45 years you never did question my flirtation with my girl friend economics and my unintended indifference or distance  or the total irresponsibility on the family front or the children's educational front ..everything  seems to be  like a dream...It also happened on your last day..I was in the hall editing the paper on economic security, to be sent for publication...

Just few valuable minutes before your departure The younger one shouted appa or daddy, I abandoned the lap top rushed in only to.. find you gasping for breath.  leaning on the youngest.In a matter of minutes you were gone ...
oh my dear what did you feel the whole day? did you know the end was nearing ? you saw to it  that the grand children should not be around at that time ..You did not also want  me to bottle up memories on the last day of your existence, giving space to children .A professor who lectured day in and day out on the concept of margin and the value of your marginal life by the very same subject with which he was romancing on that day,,.
The Annamaliyar whom you were looking at with saintly and stoic face is now on my table ..I had a full cry many times ,typing every few words...thank you my Rani Kala rani and my kalavathy who became kala Natesan  that you wrote one day with smile in the final months of your life and I respected your inner  suppressed feelings for your dad...
Thank you for all the things you have done for me and your children and grand children,by leading a frugal life with all cultured norms and hospitality shown to many including my students many of them , most of them are my friends and more like a son who will at least think about me for a while when I am gone and it is a million dollar question whether we can meet..we all miss you remember you  some time cry  and console   we did not want to give advertisement in the paper ... that amount we are earmarking for feeding the poor at Jipmer complex and Arun has been informed about this.....
you have shown me how to live and how to die .
The paper I wrote last year may come now  That will always remind me that it was  nurtured when you were making a departure, giving me a feeling of guilt ..Mind is not wandering behind walking beauty or the rising sun .
I am able to hear your voice..Let my husband work  he has not got his due yet  he will be happy only when reads and throw away all the debris accumulated since 70...The degrading desires have vanished   walking is becoming a habit..visiting temple when I am taken   craving for food has gone..Fish is the only temptation which I want to hold on because of karmic good desire..I tell many a time now Kala do you know How much I  loved you...whenever i go for walk alone....
I will change for the better I am bold and confident  Arjun says  do not cry and do not worry I am here thatha to take care   I thank the almighty to complete this in the morning hours

Happiness is like sleep not an activity to be pursued but should come to us spontaneously by the work we do

The simple questions in life are :Are you happy at this moment?Do you get adequate deep sleep?Are you doing things in life which you want to do? we can add a few more in this list...Easy questions but difficult to answer..By sheer habit we live , leading life as we please and then regret later this is not the life that we should have led ..
Personally i do realize that I have wasted away this birth although I did everything  possible on both office and domestic front ...I indeed I was so obsessed with my work ethics that I did not do full justice to family .
I was fortunate enough to internalize what Plato told long ago without actually reading him:"I am the wisest man alive for one thing , and that is that I know nothing".This naivety which is really a profound wisdom has not allowed me to fall into a pit of depression when i had the worst phase in my life -both academic and domestic..
Going back to the theme of happiness I can write a lengthy essay having read more theory on this subject.That day will wait...when we seek happiness as if it is an ideal or an act to be undertaken it does not come .Like sleep happiness too is not an activity ;If there is more anxiety and agitation sleep will not embrace you; it should come spontaneously as a reward for the honestly stored energy  expended in doing work.

More importantly if we are not happy with what we have already got  we will never be happy with what we are going to get in future. There is a saying that blessed is he who has found his work/ and let him ask no other happiness. we do not become happy once we get what we want on the material side..There is no end to ends(wants) till our end comes..
Let the supreme give us the wisdom not get tormented by guilt, racked by anxiety and exhausted by unresolved hate..Do not worry about your failing or falling ;so long as there exists a pair of loving arms to lift you and sustain your life you will survive.Resorting to Bible I would say and suggest:
"Have faith that the power that brought you here will help you through any future crisis ,whatever it may be .''