Sir,
The constant downward journey this year of Indian Rupee compared to major world currencies — fully or partially convertible — should be a major cause of concern.
The constant downtrend in the value of Rupee suggest that there is something seriously wrong with the country’s trade and financial management. High oil import bill this year may be a key reason for India’s high current account deficit (CAD) and the fall of Rupee. But, there is little effort on the part of the government to contain the outflow of USD by restricting import of avoidable items on the trade account and luxury expenditure on the service account such as foreign travel, foreign transfer of money on multiple accounts, unproductive outward corporate investments, foreign education, borrowing and debt servicing. While India can do little about the international prices of crude oil, it could certainly look into other areas to contain trade deficit and capital outflows.
According to International rating agency Fitch, Indian Rupee has been one of the worst performing currencies in Asia this year. The country’s ambition to emerge as one of the world’s major economies in real terms look somewhat hollow in the face of constant rise of its CAD. India’s export contribution to its GDP had hit a 14-year low in 2017-18 and imports are surging at disturbing rates. The country’s trade deficit increased to $160 billion in 2017-18 from $112.4 billion in 2016-17. Of this trade deficit, over $60 billion was on account of its China trade alone.
Nantoo Banerjee
on e-mail
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