India in uproar over rupee's fall

DIVYAKANT SOLANKI/EPA - An Indian vendor counts Indian rupee notes at a roadside shop in Mumbai. The rupee slumped to an all-time low on Aug. 19 despite measures to arrest the currency's decline even as government bond yields hit five-year highs.

The Indian rupee is in a free fall, and the nation is aflutter.

Almost every day, Indians are waking up to alarming headlines about their currency hitting a “historic low” or a “lifetime low.” Last week, on what was dubbed “Black Friday,” the currency sank to a record level, and Indian media carried pictures of workers in Mumbai’s financial district clutching their heads in dismay.

A gaucho rides a wild horse during the annual celebration of Criolla Week in Montevideo, April 15, 2014. Throughout Easter Week, 'gauchos', the Latin American equivalent of the North American cowboy, from all over Uruguay and neighboring Argentina and Brazil will visit Montevideo to participate in the Criolla Week to win the best rider award. The competition is held from April 13 to April 20 this year. REUTERS/Andres Stapff (URUGUAY - Tags: ANIMALS SOCIETY)

(Andres Stapff / Reuters)

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With the country’s stock market tumbling, the rupee fell further Tuesday. It is down about 15 percent against the U.S. dollar since May — from more than 53 rupees to the dollar to more than 63.

The currency has become a powerful metaphor for India’s rapidly sliding economy. The rupee has triggered countless jokes and political mudslinging, and, like everything in India, it
has generated astrological speculation, too.

Some superstitious Indians have blamed the slump on the new symbol for the rupee, unveiled last year. Experts on vastu shastra, an ancient Indian design practice similar to feng shui, say that the symbol debuted on a day inauspicious for the stars and that the horizontal line across the symbol appears to “slit the throat” of the currency.

Some economists, meanwhile, blame the rupee’s recent misfortune on plans by the U.S. Federal Reserve to begin scaling back its massive effort to stimulate the U.S. economy, which has tended to keep the dollar weak compared with other currencies.

And some blame the Indian government’s mismanagement of the economy.

India is grappling with a huge budget deficit, and the country has foreign exchange reserves to pay for only seven months of imports. Economic growth slowed to a dismal 5 percent last year, the lowest in a decade. Prices are spiraling. Foreign investors are no longer lining up; some are even packing up.

To stem the decline in the rupee, the government raised short-term interest rates, capped overseas investment by Indian companies and announced a weekly auction of government bonds, worth about $3.6 billion.

But the government, which is nearing the end of its term, appears to have woken up only after about two years of what critics have called “policy paralysis.” Even the appointment of a high-profile economist from the University of Chicago, Raghuram Rajan, as the chief of the Reserve Bank of India this month did not help calm the rupee.

Powerless so far to rein in the wayward rupee, the government even pleaded with gold-obsessed Indians to stop buying the metal, because it drains foreign exchange reserves.

“If I have one wish which the people of India can fulfill, it is ‘Don’t buy gold,’ ” Finance Minister P. Chidambaram told reporters in June. “Every ounce of gold is imported. You pay in rupees. We have to provide dollars.”

Five years ago, the rupee’s value was rising as never before, propelled by a soaring economy. What was described in the media here as the “roaring rupee” became a symbol of a nation’s proud march toward its economic ambition of becoming a global powerhouse.

The rupee’s fall might be harming the country’s collective psyche, but the greatest impact has been felt at the street level, with the country’s poor and middle class struggling with the inflation in food and fuel prices as imports become more expensive.

Shankkar Aiyar, an economic commentator, said the government’s pursuit of policies that are politically popular but fiscally irresponsible has “wrecked the script of the India story and crippled the potential of what was once touted at Davos [the World Economic Forum] as the ‘fastest-growing free market democracy.’ ”

In the run-up to national elections, scheduled for next year, the rupee has also become a campaign issue. “When India got independence, the rupee was at par with the dollar, one for one,” opposition politician Narendra Modi said at a public meeting last week, launching an attack on the government. “Sixty-seven years down the line, where is the rupee now? . . . Today, India’s finance minister’s age is equal to one dollar.”

Rajdeep Sardesai, the host of a prime-time news debate on CNN-IBN, was equally gloomy Friday. “It is increasingly apparent that the falling rupee now mirrors the state of our republic, graying before its time,” he said.

 
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