Life is how you look at it, so with the rupee


- Manika Premsingh
Worried about the rupee, right? So we are there again?

Ok. So here goes my humble opinion on the matter. What are we most worried about? My sense (amid all the noise): the spectre of 1991 Balance of Payments crisis looms large. So here is the pill to the problem (you are welcome to take the blue one and go back to where you were before you came to this page, I wont take it personally). The big difference then was our lack of import cover, right now we have more than sufficient cover, in foreign exchange reserves. Breathe easy, dear reader.

What else are we worried about? Ah, the international capital flows. True, investments in the stock markets might be dipping. But did we look at the latest FDI figures? We hit some record highs there recently. Anyone saw those nos? No? We have the highest ever FDI flows into the country in FY 12 at US $ 46 bn.

This is good money coming into the country, ladies and gentlemen. Not the fly-by-night stock market money we are weeping copious tears over. And frankly, it is not any of the authorities’ job to keep the stock markets from falling. They did not ask you to invest in them, now did they? You invested knowing the risks to it fully well, so the bad comes with the good. Hopefully, your risks have not threatened your financial security. But you believed your investment advisor did you say? Well that could have serious implications and I am sorry about it, but we have to agree that it does take the scale of the problem a bit down, no?

Besides, who all amongst us have been fretting over those ugly-ugly Industrial Production numbers we see month after month, raise your hands. See, everyone. The falling rupee is a great way to address that, since the currency is now more competitive than ever before. There is also the benefit of employment generation, since merchandise exports are concentrated in the labour intensive industrial sectors – gems and jewellery and textiles for instance. Not only does that encourage growth, it also encourages inclusion. Your blogger, has to admit a particular bent towards all inclusive policy and supports all minorities across caste, class, gender, race, region, religion, sexual orientation, disability and even if you are an Indian version of Lady Gaga (disclaimer: just for laughs).

So now, what next? Something about oil imports did I hear? It is true that oil prices have been falling and what I read says that while the rupee depreciation has wiped out the gains from this happy event, it has not increased the trade deficit either. Also, let us not forget in all this worry about oil that it represents one-third of the total merchandise imports. Two-thirds are still driven by other factors.

Like, do we remember last year’s whipping boy? Our never ending love of a certain precious metal, remember?  Well, according to reports the gold imports are declining. That is good then, right? Our savings going into conspicuous consumption like jewellery and also increasing our trade deficit! Good riddance to precious rubbish, I say!
Now what? Did those imported packets of pasta just became more expensive, dear consumer? Well, if they have not, they might soon. Sorry. But the good news is, that is exactly what we need to spur our domestic Pringles (and pasta) industry! It is bad news on the inflation front, in the short-term at least, I admit. And that is one of the reasons foreign money is leaving us, you say?

Yes, the nervous kind is. Also, because of other reasons like the Voldemort of all crises. Yes, that one, starting with the E, hat must not be named again for fear that the eyes might start bleeding. But that is no justification. Why cant we have high growth and contained inflation and high FII flows and a (relatively) strong currency and manageable fiscal deficit and healthy balance of payments (who even cared about rising trade deficits then!), just like the good old days of the mid-2000s? Well, on the only glum note in this entire post, if it seems too good to be true, it probably is. Think about it.

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