Over the last few months, the Indian rupee has fallen more than 10 per cent in value against the US dollar stirring a nation-wide debate that is no longer limited to trading pits and jargon laden financial newspapers, but has found their way to the dinner tables of ordinary Indians. Battle lines have been drawn on social media and WhatsApp groups where those with allegiance to the ruling party are either dismissing the impact of this depreciation or blaming it on the policies of the erstwhile government, while those outside the government are calling it proof of the government’s failed economic policy. It’s no surprise that “experts” from both sides of the political spectrum are rushing in to gain or save political capital, given that significant elections due in the coming months. 

While a weaker rupee is a positive sign  for exports, it poses an inflation risk for a nation that imports more than 80 per cent of its crude-oil needs, more than 800 tonnes of gold and adds to the stress on the current-account balance. The rupee dropped to as low as 72 per dollar last week and 72. 48 this Monday, keeping intact its position as Asia’s worst-performing currency this year. Every rupee change in the exchange rate against the US dollar impacts India’s crude-oil import bill by 108.8 billion rupees ($1.58 billion), according to the oil ministry.

The current level of reserves at about $402 billion will provide import cover of less than a year. The nation’s current-account gap has come under pressure and is expected to widen to 2.4 per cent of gross domestic product in the financial year to March 2019. What is disheartening to note is that the Reserve Bank of India is remaining a mute spectator to the falling rupee though initially it sold dollars to arrest the fall. This will not stem the rot. The Government’s think-tank in the NITI Ayog is also clueless as to how to bell the cat.