Goa’s currency woes

On August 15, 1947, India’s first Independence Day, the Indian rupee was 1:1 to the US Dollar. Then in the 50’s and 60’s independent India kept borrowing foreign money as loans which commenced the downward trajectory of the Indian rupee, from thereon we seem to have never recovered meaningfully from the falling rupee. Meantime, the oil shock, the Asian financial crisis, our own economic crisis of 1991 made sure our financial survival was only possible by devaluing the rupee further and further, sometimes even on an overnight basis. But even in 1991 the currency was around Rs 25 to the US Dollar. The fact that the rupee is now trying to break the 70 barrier to the US dollar only proves that our economic liberalisation is a bit overrated, unable to reverse the long term trend of our currency.

Here is another data point to mull for Party B. In May 2014 when Mr Modi took office of the Prime Minister, the Indian rupee was hovering at around Rs 59 to the US Dollar, now barely few months to go for the general elections and the Indian rupee has turned weaker in the vicinity of Rs 69 to the US Dollar. This practically settles the debate that Prime Minister Modi happens to be just another politician in the long list unable to reverse the devaluation of the rupee. 

What’s wrong with a devalued currency? How does it matter to Indians that earn and spend in Indian rupees? What is devaluation? For starters devaluation of a currency means reduction in the external value of the domestic currency. It happens when the country has an adverse balance of payments, which means we import more than we export. Are imports necessary? Well, most of our imports pertain to oil that we consume more than we possess and as long as that equation remains unchanged the Indian rupee has no scope for improvement, because we are going to be at the mercy of the OPEC cartel and international politics.

India as a country has many ways to deal with a problem of balance of payment, but these worthwhile issues hardly get discussed in the parliament which was designed to discuss debate and come out with best solutions for the country. Of course some progress was made recently in parliament and instead of shouting and yelling some debate was allowed to happen even it was mostly optics. Rahul Gandhi did follow the advice this writer gave him in the same column on January 4, 2018, to call himself Pappu openly which would pressurise his opposite number and pressurised he was. The fact that Prime Minister Modi impulsively stayed glued to his chair when Rahul walked to him reminded many of the Fevicol slogan. This type of ‘Pappugiri’ of hugging and winking might fetch Rahul some votes and some amusement at best, but it will cost the nation as real issues get sidelined in the process.

Many might argue we cannot compare the developed world currencies with the developing countries. Then why is an Asian country like Thailand enjoying a strong currency being a smaller economy than ours? Almost a decade ago the Indian Rupee and the Thai Baht were almost at par, but today the Baht has increased its value tremendously vis-a-vis the rupee. See the charts deeper and the data gets worse for the Indian Rupee. Apparently Thailand earns more foreign currency then it spends and even though it was ‘Ground Zero’ two decades back in the Asian financial crisis, it has made a remarkable recovery since.

India seems to be resigned to the fact that we are going to devalue our currency on an average one rupee to the dollar per year. Get the math, 70 years of independent India and one US dollar nearly fetches your Rs 70. Goa seems to be part of the collateral damage on the rupee woes, not only are we losing bright minds to bright jobs available abroad, but now we are also losing people by the droves on average jobs because of the attractive foreign currency conversion ratio.

Meantime Goans in Goa are made to face the music of inflation, high interest rates, and a currency which is perpetually losing its value. Here is an amusing example for those who don’t understand how value of the rupee affects every Goan in Goa. Comparing the rupee value from 2014 itself, when the present government took office, if a Goan resident is buying 100 sausages for Rs 350 the same is bought by a non-resident Goan for almost Rs 300. No, the sausage vendor is not giving the Non-Resident Goan some homecoming discount, but he has just fetched more rupees to his dollars. No wonder every Goan is in the process of changing the color of their passport.

Politicians hardly discuss these issues, be it in the Indian parliament or the Goan assembly. In fact to manage their internal economic numbers many politicians have resorted to have sold to their citizens in high technical jargon that a weaker currency is good for the country. You will never see any politician linking the country’s pride with the currency and no matter how much politician’s sugar coat it, a strong currency is not only a matter of pride but a barometer of economic success.

By the way, don’t be under the impression that Indians are leaving the country only for jobs as some politician’s believe. NW Wealth in their global survey found 23,000 Indian dollar millionaires had left India for good since 2014. It’s no surprise because most of them have just given up on the Indian rupee, as they keep losing money in dollar terms if they keep their savings in Indian currency. We can arrest the rupee slide provided politicians turn humble and ask intellectuals outside their realm to debate on this issue. Ideally this should have been done in the parliament but that will be too much to expect.

(The author is a Business Consultant)