Letter to BS: Govt should adopt strong measures to stabilise the economy

This refers to “Rupee @75-plus: Turbulence ahead” (September 27). Our long neglect of exports and reliance on domestic consumption have gradually weakened the rupee. 

Deteriorating rate of exchange is an imbalance between earning in rupee and spending in dollars. In the last quarter, we lost $26 billion in foreign exchange reserves, equal to as much as one per cent of our gross domestic product (GDP) and earned in rupees as the GDP grew by 8.2 per cent. The rupee thus kept falling, worsened by bullish crude price over the escalating US-Iran standoff. An adamant Trump presidency may well ensure this standoff doesn’t end soon, not to speak of the ongoing tariff war that affects global trade to further skew our exports and hence, rupee-dollar parity. Private investment, a measure of industrial growth, is languishing for many quarters now, which puts our macro fundamentals under stress, likely enhanced by an election year.

The slew of measures recently set in motion by the government are mainly to conserve dollar spend and to encourage dollar inflow to dress up the rupee. If we do not toil to boost real dollar earnings, we will be back to square one, but with an increased debt.

R Narayanan  Mumbai

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