Our currency is weak against all major countries/economics and reason is that we are net importers (means importing more than exporting). But, is this the only reason for depreciation of our currency. Let’s look at the below given data of USD-INR relationship since the independence. Exchange rate of USD-INR was almost equal in 1947-48 which was stable until 1990 and then drastic depreciation in INR which took USD-INR to a level of 74 in 28 years, 325% depreciation in 28 years. And such a drastic impact on our Fiscal math because we import 80% of Crude oil and pay in USD.
Such arrangements are impacting our economic growth and hitting our pockets as well because prices of petrol and diesel are increasing year on year. There are two reasons for price upward movement, one is price of crude oil itself (though it’s half since 2013-14 levels) and second is exchange rate. My point of view is that second reason is the culprit for rising fuel prices in India.
Cascading effects of fuel prices are on various commodities and services like Airfare, food items and other items. It may be main culprit for headline inflation. Was it difficult for government to control currency depreciation in last 28 years?
Understand that we had to borrow money from developed countries to run our country after independence but it is a 70 years old story.Suneel Suryavanshi
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