Letter to BS: Fall in rupee not an indication of economic decline in growth

This refers to the article “The fair value of rupee” (September 18). Rashesh Shah is absolutely correct in stating that the recent fall in the rupee against the dollar is not an indication of an economic decline in growth in India. Although it is true that the “trade war” exists between China and the US apart from the US sanctions on trade with Iran, we tend to view the fall in the value of the rupee purely from the point of view of trade with the US. We forget that the same handicap equally exists for other global countries and the value of the rupee is fundamentally stable with respect to the exchange value of these currencies. Accordingly, the fall in the value of rupee is totally due to external factors. The increase in oil prices is therefore, not a cause of worry as it is a global trade environmental circumstance. The requirement of the Reserve Bank of India intervention, curb on non-oil related imports and taking advantage of higher inflow on exports are only short-term requirements as trade and commerce are controlled by bilateral agreements and global market conditions. 

A curb on imports into India will equally affect the export trade of the related countries. A dip in our forex reserves will be detrimental to the economy which passed through a similar critical situation in 1991 when funds to meet imports was inadequate and economic collapse appeared imminent. Further the US, China and Iran will also be equally affected by adverse exchange values as their own exchange of trade will stagnate. The fear of fall in the exchange value of the rupee beyond ~80 vis-a-vis the US dollar need not be a cause for concern.

C Gopinath Nair Kochi

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