Since the US-Iran Peace deal has been announced, the fall of Indian Rupee has not only stopped but reversed. In the last 2 weeks, Indian Rupee has appreciated by ₹1.62 rupees against the US dollar which is about 1.7%. However, in the last one year, the Indian rupee has depreciated by about 9% against the US dollar.
This reversal has happened just because of one single factor; the US-Iran Peace deal which has brought down the Brent crude oil below $80/barrel.
So the value of the rupee is directly linked to domestic and global macro-economic factors. Therefore, anyone claiming that the exchange rate of the Indian Rupee against the US dollar touching to 100 is just a number and should not be cause of concern, is either sentimental or ignoring the hard facts.
Everyone knows that higher the exchange rate, the sooner the forex exchange will dry. This will lead to multiple problems for the economy.
Many also assume that a weak rupee helps exporters. It is a myopic assumption based on wrong hypotheses. The gains because of a weaker rupee are lost within months for an economy like India which has a very high imports bill.
It's good that Rupee is gaining back the lost ground. However, there is a risk in this also! It will provide a better opportunity for short-term foreign investors to withdraw their investments from India putting pressure back on rupee.
However, in any way, a strong rupee is beneficial for India. I hope this trend continues in the future also.
This reversal has happened just because of one single factor; the US-Iran Peace deal which has brought down the Brent crude oil below $80/barrel.
So the value of the rupee is directly linked to domestic and global macro-economic factors. Therefore, anyone claiming that the exchange rate of the Indian Rupee against the US dollar touching to 100 is just a number and should not be cause of concern, is either sentimental or ignoring the hard facts.
Everyone knows that higher the exchange rate, the sooner the forex exchange will dry. This will lead to multiple problems for the economy.
Many also assume that a weak rupee helps exporters. It is a myopic assumption based on wrong hypotheses. The gains because of a weaker rupee are lost within months for an economy like India which has a very high imports bill.
It's good that Rupee is gaining back the lost ground. However, there is a risk in this also! It will provide a better opportunity for short-term foreign investors to withdraw their investments from India putting pressure back on rupee.
However, in any way, a strong rupee is beneficial for India. I hope this trend continues in the future also.
Rajeev Upadhyay
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