The Indian rupee is falling like ninepins against the US dollar – sinking to a historic low every day. The INR Thursday crashed below the 72-level for the first time on persistent global headwinds and concerns on macroeconomic front. It closed at `71.99 a dollar. Never before in the recent memory has the rupee taken a worse drubbing from dollar. It has shed nearly `3.50 in a month out of which 200 paise have been lost in seven trading sessions. The fall in rupee during last few weeks is in line with other emerging currencies amid concern over the risk of contagion from Turkey and Argentina’s financial market turmoil. The crude prices have been firming up in international markets, further eroding the rupee value. Crude has gained USD 7 a barrel in a fortnight driven by fears that the US sanctions on Iran will worsen the global crude shortage, leading to a spike in crude prices. The rate at which the rupee’s value is eroding, it may lead to a wave of corporate bankruptcies and negative rating on these firms as they have kept most of their foreign currency exposures unhedged. India will be vulnerable to large scale capital flights if the uncertainty persists. Investors may make their way back into developed markets due to rising interest rates in the US and other major economies. But, the government sounds terribly smug, choosing to brazen out the unfolding crisis. For it, there is nothing to worry over the daily plummeting rupee. It argues that the currency will find its feet, without much effort from outside. A Union Finance Ministry official Wednesday said there is very little that the government can do about the falling rupee.
More than the depreciating rupee, the steep rise in fuel prices has been troubling people. An uptick in fuel prices has led to a rise in prices across commodities. The price rise will likely push the inflation way beyond the comfort level of the Reserve Bank of India. A runaway inflation will prompt the central bank to raise lending rates — an anathema for the Indian economic growth. The government took away all the gains that accrued from soft crude prices during the first three years of this government. An overdose of rain in August and early September has raised the risk of floods in the state. Finance Minister Arun Jaitely Wednesday remained non-committal on cutting excise duty to cushion the spiraling diesel and petrol prices. Almost half of the retail selling price of the two fuels comprises central and state taxes. Prices have been on fire since mid-August rising almost every day due to a combination of a drop in the value of the rupee and rise in crude oil rates. If the rupee continues to erode its value against dollar, fuel prices will further go up. The government should stop its waiting game now. It should step in to stymie the fall of rupee and simultaneously reduce the excise duty so that the fuel shock is somewhat cushioned. With general elections remaining less than a year, the current dilly-dallying by the Centre is baffling.
Mahatma Gandhi, in an attempt to address casteist oppression, coined the term Harijan to refer to the then ‘untouchables’. He...Read more