Noted economist, Arvind Panagariya, has lately in his article in Foreign Policy magazine argued in favour of depreciating Indian currency. In a laudable attempt, he has cited India’s trade imbalance and argued that a weaker rupee will in fact help cut deficit since imported goods and services are bound to become costlier, upon which Indians would shift to domestically produced items. Such arguments may sound positive in an ideal world. In the real world, however, a weakening currency raises many eyebrows, including of foreign investors and rating agencies, and on its face is an indicator that not everything in the economy is sorted.
Even those who are not seasoned economists or politicians can tell why the rupee is falling against US dollar. Outflow of investments from Indian markets, rising interest rate in the US, India’s widening trade deficit on account of rising crude prices in international market are some key reasons behind rupee’s depreciation. And honestly, no one would want a freely falling rupee, not even exporters who gain from it since their goods and services become more competitive in international trade. That the RBI intervenes by way of selling dollars to stem any sharp fall in Indian currency is in itself a manifestation of anxiety and subsequent corrective actions undertaken.
Reality is indeed strikingly in contrast to rhetoric. India has a rising middle class that is buying imported goods- from mobile phones to luxury cars- like never before. Electronics are now at the second place on our imports table only after crude oil. Crude is traded in dollar and there lies no justifiable argument that can establish that a falling rupee is a good phenomenon. Arvind Panagariya’s appreciation of a falling rupee and its positive impact on India’s trade with foreign economies thus sounds unconvincing. And for the ruling dispensation that is on the defensive mode on demonetization ever since the RBI report saying almost all scrapped notes are back into the system is out, finding pluses in a falling rupee can be suicidal.
As if the rupee tumble wasn’t enough in the final months of the BJP-led government, rising oil prices are setting the tone for next general elections. For most Indians, if the price of petrol and diesel has touched historical highs, it is the fault of the government they voted in. A common voter has nothing to do with US sanctions on Iran or supply cuts by OPEC or falling inventories of US shale. But yes, the new voter equipped with a smartphone does know that central and state taxes on petroleum almost double their price in retail market. They also feel the pinch when on account of high transportation costs the prices of vegetables and other essential commodities shoot up.
International economists have repeatedly stressed on the need of a second term for the Modi-led government so that India can realise its true potential and the dream of inclusive development can come true. But for the electorate, any government that cannot rein in petroleum prices and stem currency’s fall isn’t an efficient one. The backward classes are already feeling disenchanted with the government over issues ranging from cow slaughter to reservation, and if the burgeoning middle class also distances itself from PM Modi over rising costs of petrol and other imported goods, the BJP may taste a shock similar to NDA defeat in 2004.
Although the government and party officials are aware of the double-whammy of rising oil prices and falling rupee, the Modi-led cabinet isn’t finding enough elbow room to maneuver and produce desired outcomes. The truth is traditional measures won’t bring about the change needed; it is time to take the unconventional route. It is time that the Indian government makes it clear to the United States that their unilaterally placed sanctions on Iran are damaging to India’s interests; hence we would not abide by them. We import more than 80 percent of crude we need, hence not working actively on such alternates as lithium ion batteries that power vehicles is a policy failure. China is the world leader in lithium batteries and it is high time we take a cue from them.
As far as the falling rupee is concerned we may not be in a position to reverse the trend in the short-run. But since we know it is the declining demand of Indian currency vis-à-vis other currencies that results in its touching new lows with every passing day, we are to work aggressively on Make in India. Even if we leave out crude from our import basket, other items including consumer goods and machinery parts, which can be replaced with domestically produced goods, crave for policymakers attention. And for making Make in India a success, India first needs to shake up its bureaucracy that is riddled with inaction, inefficiency and vested interests.
The nation needs a second phase of reforms and decisive policy actions, thus a second term for BJP remains an indispensable element. But the BJP cannot overlook the fact that since they won a landslide victory in 2014 on the back of tall promises, voters may get disillusioned even on mediocre deliveries; the electorate in fact was looking forward to miracles from the Modi-led cabinet and a non-delivery on this part can be damaging for the party. Criticism of the government on rising price of petroleum products and depreciating Indian rupee can spell anything but a boost for Prime Minister Modi.
No economist can predict where rupee and crude are heading in the near future. If forecasts are anything to go by, crude will inflict more pain on importing countries, and a robust US economy will not allow Asian currencies to rebound. Should the existing conditions continue for 3 months more, the rupee breaching the 80-mark against US dollar and petrol prices touching new records of Rs. 90/ litre cannot be completely ruled out. Slowly but steadily, an anti-Modi wave is picking up, and convincing the electorate that the government has no control over rising petrol prices is becoming even more difficult. Squarely blaming external factors cannot be a defense for long.
It is in the best interest of the BJP to dissolve the Lok Sabha before this wave becomes too prominent and formidable. With Amit Shah as the chief strategist, we can hope that the BJP may consider going for early general elections to not allow opposition build on the momentum. But even this looks doubtful in the wake of legislative assembly elections in the states of Rajasthan, Chhattisgarh, MP, Telangana (assembly dissolved by TRS) and Mizoram later in 2018. The way around is to dissolve, without any further delay, assemblies of first three aforementioned states where BJP is in power, and persuade the election commission to conduct state assemblies and Lok Sabha polls simultaneously.
Reining in petrol price rise and rupee fall isn’t an easy task given the macroeconomic factors involved; betting on early polls can be a game changer.
Free gas connections, mudra loans and so many other schemes have been initiated for poor and marginalised. Rupee fall and oil prices are not in government control and it cannot be blamed for that.
There are so many anti-Modi and anti-BJP messages on social media that the BJP leadership itself is anxious. Now is the time when Amit Shah will come out with a unique strategy.
With every passing day, Modi magic is slowly calming down. Best is that BJP calls early elections so that any further damage can be averted. Else it will be very challenging to win in 2019 elections.
Rajasthan, Madhya Pradesh and Chhattisgarh elections will show a clear picture of what voters are thinking in 2018. Lok Sabha results will also be almost same as these state polls.
What a repeat of history this is. The situation is almost similar to 2014 when Congress was gripped by anti-incumbency wave, lets see how Modi and Shah tackle this.
As far as dalits and farmers are concerned, many have now realised that Modi is not a hero as was expected. With petrol and diesel rising even urban middle class is feeling the pain and this is a bad sign for BJP.
Petrol is not produced in India, we only refine crude that we import. So when price of crude is rising in international market what can the government or PM do?
How many agitations over petrol and rupee have been done by common man? Only opposition political parties are demonstrating as they have no other agenda to tackle BJP rise.
One thing is almost sure. 2019 will not be 2014. This time BJP will not only face anti incumbency but also resistance since government has not been deliver on jobs, manufacturing and poverty alienation.
India stands with Modi as far as petrol price is concerned. People now understand that they are rising due to global pressures and government has almost no role in this.
I definitely enjoyed every bit of it.
Excellent, what a webpage it is. This website provides useful information to us, keep it up.
Thanks for helping out, wonderful info .
You are so cool. I do not believe I have read something like that before.
The website is fantastic and something your group should be really proud of.
I really appreciate your writing.
You are so awesome. I do not believe I have read through a single thing like this before
The data mentioned within the article are a few of the very best readily available
I love looking through an article that can make men and women think. Also, thanks for allowing for me to comment.
Good post. I am dealing with many of these issues as well..
Your website is very
I need to to thank you for this wonderful read.. I certainly loved every little bit of it. I have got you book-marked to look at new stuff you post
Congratulations for all the effort putten in to reach to such explanatory and efficient article.
I should be leaving this one liner for your hard work. Great knowledge and good command over writing. Long way to go.
Amazing blogsite, greetings.
You have made some decent points there.
Nice post. I learn something totally new and challenging on sites I stumbleupon everyday.
I just had to drop you a line to let you know that John and I think that the website is BRILLIANT……………………… Well done.
Very great post. I simply stumbled upon your weblog and wanted to say that I have really loved browsing your weblog posts. In any case I will be subscribing on your rss feed and I hope you write once more very soon.
I could not refrain from commenting. Exceptionally well written.
Great article. I am facing some of these issues as
An article of great help and value.
Pretty. This has been an incredibly wonderful article. Many thanks for supplying this information
I gotta favorite this internet site it seems very useful very helpful
I started to read your article and it caught me to the extent that I could not put it down. Amazing piece.
Really.. thanks for starting this up. This web site is one thing that is required on the web, someone with a bit of originality.
Just spent a few very enjoyable minutes looking at the site. Excellent. Well done. Overall very good: clean, easy to navigate, informative and, importantly, interesting.
It is always exciting to read through articles from other authors and
You made some good points there.
This is a very good tip particularly to those fresh to the blogosphere. Short but very accurate info Appreciate your sharing this one. A must read article.
Pretty. This has been a really wonderful article. Thanks for supplying these details
Your write-up is really amazing and it must reach to most of the people all over the world.
I blog often and I genuinely appreciate your content.
Keep up the good work.
Let me encourage your attention to details which puts you at the top amongst all the bloggers.
It was definitely informative.
I quite like reading an article that can make men and women think. Also, thank you for permitting me to comment.
Hello there. This blog post could not be written much better. Going through this article reminds me of my previous roommate. He constantly kept talking about this. I will send this information to him. Fairly certain he will have a very good read. I appreciate you for sharing.
I read this article completely about the comparison of most up-to-date and preceding technologies, it is remarkable article.
Great article. Keep writing such kind of information on your site. Im really impressed by your blog.
The next time I read a blog, I hope that it does not fail me as much as this one. After all, I know it was my choice to read, nonetheless I actually thought you would probably have something helpful to talk about. All I hear is a bunch of whining about something that you could fix if you weren
Your write-up is very informatory hope you are sure with credentials of the matter.
This a wonderful blog submit. It is so nice when persons appreciate all that you do.
Very concise but well thought off.
I commend you for your excellent writing. A well researched one.
Your article will surely be a great help to a lot of people. An outstanding blend of thinking and good writing.
It is hard to find experienced people for this subject,
Great delivery. Sound arguments. Keep up the amazing spirit.
Absolutely wonderful, well done everyone, what a great achievement. Here is to the future and success for everyone. Thank you all for your hard work, we know it will be ongoing and trust that you will get the appreciation and credit of putting such brilliant articles on the worldwide web. Looking forward to seeing it grow.
Your piece was very revealing. Never heard of the issue presented in that light.
After looking into a handful of the blog articles on your website, I seriously like your technique of writing a blog. I added it to my bookmark site list and will be checking back in the near future.
Oh my goodness. Amazing article dude. Thank you so much
Very good post. I absolutely love this site. Stick with it.
I applaud the publications of yours.
Such well drafted articles are not easily found on web. Cudos.
A powerful piece of writing. Very inspirational.
it is an amazing piece of writing designed for all the online visitors. they will get benefit from it I am sure.
Thanks for the marvelous posting. I genuinely enjoyed reading it, you are a great author. I will always bookmark your blog and will come back very soon. I want to encourage that you continue your great work,have a nice day.
This is the perfect webpage for anybody who hopes to understand this topic.
A clear and incisive analysis of the subject. Hope to read more of such stuff.w
It is a nice piece of writing which is rare to find these days.
I like the way you put thoughts forward
Excellent, what a blog it is. This weblog provides valuable data to us, keep it up
Great blog you have got here..
So good to find somebody with some unique thoughts on this subject matter. Really.. thanks for starting this up.
I have learn several just right stuff here. Certainly price bookmarking for revisiting. I wonder how much effort you set to create such a fantastic informative web site.
Greetings. Very useful advice in this particular post. it is the little changes which will make the most important changes.Thanks for sharing.
I really appreciate your efforts and I will be waiting for your further write ups thanks once again.
This is a jaw-dropping information. Well done on your research and presentation.
Had a look through the site, it looks great and will be a big help in social and economic issues.
I do accept as true with all of the ideas you have introduced for your post. They are very convincing and will certainly work.Thank you for the post.
Hi there to all, how is the whole thing, I think every one is getting more from this web site, and your views are pleasant designed for new users.
It is an honour to have a view of this website which has so much information for everyone.
I used to be able to find good information from your blog posts.
Nice Post
I visit daily a few web sites and sites to read articles or reviews, however this blog provides feature based articles.
Hi there to every one, since I am really eager of reading this weblogs post to be updated daily. It contains fastidious stuff.
Spot on with this write-up, I absolutely believe that this amazing site needs much more attention. I will probably be returning to read through more, thanks for the advice.
You are to be commended for your excellent writing skills.Hope to see more of your flawless skills soon.
Hello there, you have done an incredible job. I will certainly digg it and personally suggest to my friends.
I am highly impressed with the think tank that you possess. I wonder how 1 man can have so much of knowledge
An intriguing discussion is definitely worth comment. I do believe that you ought to publish more on this issue, it may not be a taboo matter but typically people do not speak
Thank you for the introduction to the new website. I will be re-visiting it many times, but on a fast run-through it looks really great.
Could not stop myself from appreciating your article. An excellent one.