Why This Fuss Over the Rupee?

The rupee is tantalizingly close to the 70 mark against the dollar. But why are so many Indians talking about it? Why this ruckus? Does it mean anything to us? Do we need to panic? Our lives won’t change much, will they? We still can go about watching reality shows and spending on expensive gadgets. What do we care if the SENSEX has tanked almost 2000 points in 2 months? Who invests in the stock exchange anyway? Right?

Actually, the weakening rupee will impact all our lives a lot. Let me tell you how.

Most Indian companies borrow from foreign banks because it means a huge savings in interest rates for them. While Benchmark Prime Lending Rate (BPLR) for commercial borrowing offered by Indian banks ranges between 9-11%, interest rates offered by foreign banks may be as low as 3-4%. Telecom companies like Bharti Airtel took loans as large as $52 million through External Commercial Borrowings (ECB). Almost all companies are debt laden; some more than the others. Now that the rupee has weakened, their savings due to lower interest rates have been wiped out. This not only translates to lesser pay hikes for employees but also leads to downsizing. Many blue chip companies in India are already laying people off. Imagine the stress on midsized and smaller firms. So, for one, the weakening rupee jeopardizes increments and jobs.

Now, 70% of India’s imports comprise of crude oil. This crude oil provides our country with petrol, diesel, cooking gas and more. With the rupee weakening, the government will have to shell out more for these crude oil barrels. And they’re not kind enough to bear the brunt themselves. It will be passed on to common man. As a result, we will have to shell out more for these commodities along with vegetables and daily goods. Hence the talk of increasing diesel’s price by Rs. 5 at once. Also, other imports like cars, electronic gadgets (mobile phones, cameras, TVs, etc.) will get expensive. So while our salaries won’t increase, the cost of everything else will. We won’t be able to protect ourselves from the ever increasing inflation.

Rupee v/s Dollar since 2011

Foreign funds and entities will not invest in India. They would rather prefer staying invested in a safe haven like the dollar instead of investing in India and running the risk of losing money.

The economy has spiralled out of control. It is now out of the Congress’ hands. They’ve made ½ the population so dependent upon them that getting out of this gloom doesn’t seem possible for the next year. The Food Security Bill will bleed the country’s coffers of 70,000 crore bucks. As always, it will be ridded with corruption and very few of the deserving poor will get food. Plus, schemes like MGNREGA have made labourers in villages leave farming and sit at home. By registering for this scheme, people are assured of Rs. 100 per day for 100 days. Farmers now find it very hard to get daily wage workers to toil on their farms. Even if they do, the labour is expensive. This means the cost of crops (and invariably, food) increases. Plus, labourers get used to earning without working. This leads to a slowdown in farming, infrastructure projects, fishing, manufacturing and other sectors.

While we can’t guarantee that another party will perform better than the Congress, we should give them a chance. If Modi can drive growth in our country, reduce the leeches in our economy, clear some cobwebs among pending projects, shouldn’t we give the BJP a chance? Even if they don’t do a phenomenal job and the Congress returns to power 5 years later, the latter will at least know that they can’t take their seats for granted. The Congress is complacent now. We need to do something to give them a jolt.

image Courtesy: Google images