It is the first corrective for a big trade deficit
Over three months, the rupee has slid 15% against the dollar, which is surging against most other currencies worldwide. The reason: economic recovery in the US and the continued faith in the dollar as the reserve currency of the world.
In India, there are yelps of agony over the rupee's slide, as if its value against the dollar is some sort of measure of India's standing in the world. India's economy is now more open than it ever was and the rupee's movements are subject to the vagaries of traders worldwide.
And a little depreciation is not a bad thing. Exports have been sluggish for many months as the US and Europe struggled with their own woes and lower-cost nations such as Bangladeshchipped away at our share of textile and garment exports. That could change with a weaker rupee.
The biggest gainer, of course, would be software exporter TCS as our analysis on Wednesday showed, followed by a clutch of software, auto and machinery manufacturers. What's good for exports is good for our current account deficit, which can narrow sharply on the back of this depreciation.
Remittances are expected to rise quickly, as Indians working overseas seize this window and send dollars back home.
Discretionary imports, like fine foods, personal care products and so on will be discouraged. And gold imports, a huge drain on foreign exchange reserves, are sure to get squeezed by higher rupee prices.
The government should now focus on reining in inflation, part of the reason for the rupee's weakness and likely to go up because of that weakening.
The Reserve Bank of India has done what it could by keeping interest rates fairly high, but a lot of inflation is related to administrative lapses. Release part of the 78-million-tonne grain mountain into markets to dampen food grain inflation, now at 17%.
Ask states to scrap the APMC Acts that keep farmers in the clutches of middlemen. Clear projects quicker, so that investment materialises. Do these things, the rupee will take care of itself. India has to get growth and investment going, first and foremost.
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Over three months, the rupee has slid 15% against the dollar, which is surging against most other currencies worldwide. The reason: economic recovery in the US and the continued faith in the dollar as the reserve currency of the world.
In India, there are yelps of agony over the rupee's slide, as if its value against the dollar is some sort of measure of India's standing in the world. India's economy is now more open than it ever was and the rupee's movements are subject to the vagaries of traders worldwide.
And a little depreciation is not a bad thing. Exports have been sluggish for many months as the US and Europe struggled with their own woes and lower-cost nations such as Bangladeshchipped away at our share of textile and garment exports. That could change with a weaker rupee.
The biggest gainer, of course, would be software exporter TCS as our analysis on Wednesday showed, followed by a clutch of software, auto and machinery manufacturers. What's good for exports is good for our current account deficit, which can narrow sharply on the back of this depreciation.
Remittances are expected to rise quickly, as Indians working overseas seize this window and send dollars back home.
Discretionary imports, like fine foods, personal care products and so on will be discouraged. And gold imports, a huge drain on foreign exchange reserves, are sure to get squeezed by higher rupee prices.
The government should now focus on reining in inflation, part of the reason for the rupee's weakness and likely to go up because of that weakening.
The Reserve Bank of India has done what it could by keeping interest rates fairly high, but a lot of inflation is related to administrative lapses. Release part of the 78-million-tonne grain mountain into markets to dampen food grain inflation, now at 17%.
Ask states to scrap the APMC Acts that keep farmers in the clutches of middlemen. Clear projects quicker, so that investment materialises. Do these things, the rupee will take care of itself. India has to get growth and investment going, first and foremost.
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