The rupee has touched another low against the US dollar. Here is one simple way to understand what has gone wrong. Any currency is used to purchase things. High inflation has ensured that the rupee has already lost value in terms of what it can buy within India. The declining international value of the currency is a mirror image of this. A weak rupee can no longer buy as much abroad as it once used to. The loss of local purchasing power and the loss of global purchasing power are, in a way, two sides of the same coin. So the underlying problem is high inflation, which has pushed up the cost of Indian products in global markets leading to a massive trade deficit. The rupee needs to fall if India is to maintain its global competitiveness. The more long-term challenge is to bring down inflation, the roots of which lie in the reckless economic policy that has pushed up consumption with high fiscal deficits, while killing investment.
Posted on: Thu, 27 Jun 2013 04:01:43 +0000
Trending Topics
Recently Viewed Topics
© 2015