Port Wings, 10 Oct 2018:
Last week, the Indian rupee breached 74.00 level against the US dollar for the first time ever in nation’s history and hit an all-time low.
Since then, the volatility of closing between 73.50 and 74.00 levels, it has given a sense of growing fears of contagion from an emerging-market rout and escalation of global trade war between China and United States of America.
With Rajasthan, Telangana, Mizoram, Chhattisgarh and Madhya Pradesh facing assembly elections this Nov-Dec period and Lok Sabha elections scheduled to be held in the first half of 2019, the BJP government has come under fire from opposition parties for its inability to shield the common man from the effects of a falling rupee and ever increasing fuel prices.
While several measures have been suggested to contain the historic rupee fall, Indian currency is not the only one to lose major ground this year due to geopolitical and fiscal factors.
In fact, during the last five years, the rupee has lost merely 15.52%. On the other hand, key currencies around the world have lost significant portion of their value against the dollar during the same period. For instance, Argentinian Peso fell 546.72%, Turkish Lira was down 221% and Russian Ruble lost 117.41% during the last five years.
Hit by high inflation at 30%, interest rates at 60%, higher taxes and a severe drought, the Argentinian economy is on the verge of a collapse. Peso lost major ground against the Dollar in April due to investor concerns about the government’s ability to control inflation and interest rate hikes by the US Federal Reserve, which strengthened the dollar worldwide.
Likewise the ongoing cold war between Turkey and US has severely affected the former’s currency values. Turkey relies heavily on foreign-currency debt. In Turkey, inflation surged to 17.9 percent year-on-year in August, its highest level since late 2003, prompting the central bank to signal hard measures. The Lira has lost more than 40 percent of its value this year due to concerns over President Tayyip Erdogan’s grip on monetary policy and, more recently, over a diplomatic row between Ankara and Washington.
Also, Russia’s Ruble has been hit by the news of fresh US sanctions over Moscow’s alleged poisoning of an ex-spy in Britain. The currency has also taken cues from the Turkish Lira crisis which sent currencies across the world tumbling against the dollar.
While these countries are facing the music with a reason, India seems to be caught in the controversy and paying for being the crude import-depended country. With US forcing India to stop buying crude from Iran thus creating more financial troubles to the ruling government in the ensuing election year, BJP seems to be fighting the devil without knowing how to win.
More trouble bound to start from 4 November for the government when the US’s ban on buying crude from Iran officially kicking in. And it will leave our country’s economy in very vulnerable position.