Tag Archive: Dollar

Imagine the Indian rupee having the status of a global currency. This might seem more of a fantasy and less of reality. But this was the picture of the Rupee some 50 years ago. However, the two major financial crises in 1966 and 1991 led to the consequent devaluation of the rupee. In the present scenario, it is no secret that India is achieving robust growth with an average increase of about 9% in its GDP every year. This might lead to the belief that the Rupee must also have been making significant progress. However the reality is quite contrary. It’s astonishing to know that the reason behind this is the Indian government itself. Had the government not interfered, the rupee would have been soaring high as expected. What forced the government and the RBI to suppress the growth of the rupee? Let us see the reasons behind the government’s bizarre actions.

Since the last few years the government has been doing its part to keep the Indian rupee in a low profile. In plain words the Indian government has been preventing it from gaining strength against other currencies especially the U.S. dollar. This is done in order to protect the Indian exporters particularly the IT sector followed by the jewellery and the textile sectors. Since these sectors are the major players in our economy, the government and RBI are keen to control the growth of the Indian rupee. The role of the apex bank is significant in this regard. Stronger rupee will be a severe blow to all the exporting firms. And there is the example of how China spread its goods across the world through the cheap Renminbi.

Several counter arguments have been raised stating that “A strong rupee does not imply weak imports”. The best example to this statement is that of Japan and Germany. During the 70s and 80s, Japan made remarkable progress in its global exports trade while simultaneously Yen gained significantly against the Dollar. High production technology and good quality has been a characteristic of the Japanese goods. Even Germany has been the world’s largest exporter of hi- tech goods despite its strong currency. This feature is however absent in the Chinese goods. It’s disturbing to note that even Indian goods lack this feature. As the rupee gains, the IT sector will be affected to a drastic level as most of the outsourcing jobs by the U.S. are driven by the weak rupee. However, it’s inevitable that for the future growth of any sector, new technology and better quality is the key.

A strong rupee can actually be the solution to this problem when viewed from a different perspective. For one, it would bring down the cost of technology – mainly the capital equipment and raw materials which in turn can produce better exports. This would revolutionize the manufacturing sector in India. But some losses cannot be avoided i.e. those who fail to make a transition from mere cost-arbitrage to a competitiveness driven by technology and quality. However the major firms in the exporting sector will be able to make the transition. The strong belief for this comes from the fact that the people and companies from this country are involved in development of high technology all over the world. It is just an artificially cheap rupee that prevents them from doing the same in their homeland.

Of course, there are several additional benefits to reap from the strong rupee. It will reduce the inflation through cheaper imports of several commodities particularly oil. The Indian government will also be able to issue rupee denominated bonds to foreign investors for infrastructure projects which will in turn help the rupee to regain its lost glory. Half a century ago it was a key currency for trade, spreading from UAE in west to Hong Kong and Malaysia in the east. The rupee was quite strong then, 4.75 to the U.S. dollar compared to the high 40s now.

The government has announced a unique symbol for the rupee (read here). This might mark an end to the era where it tries to erode the strength of the rupee. “Strong symbol implies strong substance”. This should be the future of the Indian rupee.

– Radha Krotthapalli

Evoking national pride and international attention, the Indian rupee attained a new avatar in its new symbol. Backed by over a trillion dollar strong economy, the Rupee is now set to go places and whooping it out loud to the world – the very purpose of giving Indian rupee a distinct and identifiable symbol of it‟s own.

Rupee now joins the elite club of super strong currencies of US Dollar ($), Japanese Yen (¥), British Pound (£) and EU’s Euro (€), having internationally accepted symbols for them. The Indian growth story is very much intact and is growing strength by strength every passing day. And in this context this move is seen as a symbol not only of Indian currency but also of the Indian ambition to regain its lost glory and again become a global superpower.

“It’s a big statement on the Indian currency. It would lend a distinctive character and identity to the currency and further highlight the strength and robustness of the Indian economy as also a favoured destination for global investments,” said Ms. Ambika Soni, Information & Broadcasting Minister, at a Cabinet meeting.

Apart from all this hoopla, the new symbol shall also be serving the purpose of differentiating Indian rupee from its troublesome neighboring countries — Pakistan, Nepal, Sri Lanka and Indonesia — similarly known rupee or rupiah. But all this symbolism shall not hold any importance unless it‟s backed by bold and efficient government policies.

The currency has got an international face but is still to become international in its character. With the introduction of this symbol, the debate surrounding complete capital account convertibility is again expected to shoot up. We are yet to deal with our problems of rampant corruption, astounding poverty and in recent years of income inequality.

Long term implications of the new symbol shall be visible in days to come. But it sure is a time to acknowledge and celebrate our achievements of the past 20 years of economic reforms and gear ourselves for the arduous task of realizing the Indian dream that lies ahead.

– Shreyank Jamar.