Why rupee loses more than currencies of nations with slower growth

A country's currency gets stronger as its productivity rises relative to others; India needs more labour-intensive activity to absorb surplus labour from agriculture, writes T N Ninan

Economic theory tells us that a country’s currency becomes more expensive (ie, it rises relative to other currencies) as its productivity level rises relative to others. The reason has to do with goods and services that can be traded internationally, like cars, as against those that can’t, like hair-cuts. As productivity (ie car output per employee) goes up at Maruti, the price of a hair-cut will go up by more than the price of a car — since a barber cannot improve his productivity (hair-cuts per year) in the way that a car company can through automation. This explains why