FALL of INDIAN RUPEE and ECONOMY

In last couple of months there was so many times when Indian news channels flashed their breaking news “Rupee touches all- time low against dollar” on each time the value of our Indian currency depreciated to its lowest level, breaking the previous record of its own. The economic experts, politicians, industrialists comes on the prime time shows of the news channel to discuss, argue and debate the current economical condition of our country. They say that the current fiscal deficit has increased; Industries are not able to make profits even equal to the EMI which they have to pay as part of their loan and on top of this due to the depreciation in rupee they have to pay more if the loans are in dollar currency. Other than the service sector, the story of most of the industries and factories are similar.

All this brought a sense of curiosity in me to know more about the economical situation of my country. I listened to the expert’s views on major news channels, googled some facts, read the analysis done by some national and international experts of the Indian economy.

I don’t say I became expert in economics but what I conclude is that the economy of our country is not strong from the core and we are standing on support of other countries. There are ample facts and reasons behind my conclusion.

Let’s take an example of a salaried person. A normal salaried individual will do his economic planning in such a way that his expenses should be lower than his salary. Some part of the saved money is kept for invisible future troubles and rest will be used to make more money. To make more money, the saved money will be used as an investment in Gold, Real estate, Mutual funds, Insurance scheme, Stocks etc. If this is the story of a businessman, then he uses his saved money for the further expansion of his business.

Now what if the same person unfortunately loses his job and the jobs are not available in the market, then the obvious question in front of him will be how long he can survive on the money which he has saved till date. After some time he will start to borrow the money from others and will try to earn the money from the alternate paths. The extreme financial situation can lead to follow unwanted paths for him.

The situation with our country is almost the same. Our country earns money mainly through exports, different tax system like Personal tax, VAT, Sales tax, corporate tax and from the government owned companies. The government spends in Imports, Subsidies, Defence equipments, Salaries of defence people and other government employees and of course the expense of our so many political leaders as there are so many MP’s and MLA’s in our country.

For any country like at individual level, the income should be more than the domestic expenses and then the additional saved money are used in further strengthening the economy by providing infrastructure facilities like roads, bridges, airports, railways etc which helps in fast growth of economy. If this situation prevails then the economy is said to be progressive and vibrant.

In the current time, the expenses of our country are more than the income. The falling rupee is adding fuel as it has led to increase in the import cost. If this continues then in order to survive further, the country has to take loans from International banks and then they will provide the loan based on their own terms and business conditions and off course higher interest rate. Ultimately this will lead to vicious circle of debt in the country.

There are several reasons which affect the economical conditions of a country. Some of the main points which draw our attentions for this messy situation of our economy are:

1. India is 3^rd largest country in the world in coal reserves but still it imports the coal from other countries for the power generation.
2. India is one of the largest consumers in electronic goods and computers. Every year we get more than 4 lakhs of new technical graduates but still most of the electronic goods like mobile phones, LED/LCD TVs, Smart Phones, electronic toys and their hardware parts are imported from other countries. The computer and laptops are only assembled in India.
3. Most of our defence equipments and around 80% of crude petroleum are imported. We never tried to become self reliant on fuel sector by aggressive oil exploring activities.
4. Our IT sector will be termed as export as we are exporting the services but again this export is not in the control of Indian government. If tomorrow USA, UK or European countries decides to stop the services from the developing countries, that’s almost an end of the most of the IT companies operating from India. In fact this has already stared due to the political pressure on the government of these countries.
5. Our obsession to foreign products and foreign mentality also leads to the increase in import. Most of our everyday usage items are imported ones. The BMW car is seen as a normal car in UK or European countries and is used by a common employee but in our country the BMW is seen as Royal status symbol. We attach our show off with the imported products.

 Most of the developed countries of the world, first made them self reliant and then come to the other parts of the world to increase their business for further earnings. So if they separate themselves from other parts of the world and try to live in their own world, they can survive very well. But we cannot survive for more than a month if we stop the trade relationship from other parts of the world. In the name and process of globalization, we got too much dependant on the economic and political conditions of other countries. In order to save the economy our government is asking the foreign companies to invest in India in the name of FDI. Indian Government is making the conditions easier and easier for them but most of them are not willing to invest due to the loss of trust and poor governance from the centre. The Rupee is falling and will fall further if there is no improvement in such situation as this will directly put less demand of rupee.

We all will be impacted individually of such worse economic conditions of the country. The depreciation of rupee will lead to inflation. Inflation may be supported by increase in salary and subsequently printing of more currency notes from RBI and very soon we will see the big currency notes of Rs 2000 or Rs 5000. The lower value of currency from Re1 to Rs100 will be of no value. The strength of purchasing power of rupee has declined and is on further decline. The biggest currency note of USA is 100 dollar and for UK its 50 pound note. The strength of their currency is almost the same as it was 25-30 years back.  Today in India the purchasing power of one lakh rupee is equivalent to around Rs1000 around 25-30 years back.

The question in front of us is how our economy can be vibrant and more self dependant.

On the big scale, our country needs a strong and visionary leader who should not only think of and beg to the other parts of the world to come and invest in India to provide the jobs. There should be a will to improve and boost the local industries of India so that the Indian product should be competitive enough to the other parts of the world. Instead of just becoming consumer market for the whole world, India should be in the position to export its product throughout the world and make the whole world as the consumer of Indian products. There should be globalization to compete with the whole world but self dependency should be the first priority. We should be fundamentally so strong that the recession in west should not shake us at the core. In the current scenario any political or economical decision in other parts of the world shakes our economy and the fears comes in the form of recession, rupee depreciation, falling of Indian share market, job loss etc.

There is no doubt that the effective and rapid solution is only possible form the effective policies of our government. We as an individual can contribute by avoiding the use of imported products in our daily life. We should mainly use indigenous or swadeshi products in our daily life. 

India is a big country and rich in almost all minerals and natural resources. We have a huge pool of young and energetic human resource. There is all potential and possibility for India to become self reliant and leader of the world in terms of education, science and technology, innovations, Agriculture and service sectors.

The day we become self reliant, we don’t have to bother even a little on what political or economical decisions are taken in US, UK or in any parts of the world, rather the world will be watching, analysing and predicting the India’s next political or economical step for their own betterment.