I’ve never written to you before, but this #10YearChallenge I’ve noticed on social media is as good an opportunity as any for me (the Indian Rupee) to tell you about my life in the last decade. Mine can’t be captured in a picture, so let me share with you 1000 words instead. So here goes…
The period from 2009-2013 was pretty grim for me. A lot was going on internally and externally and it was in 2013 that I reached my ‘lifetime low’. My rate had fallen from Rs.46/dollar in 2009 to Rs.63/dollar in 2013. For my serious downfall, some blamed the UPA government’s mismanagement and some blamed it on the reviving US economy, while some even made it a superstitious thing and blamed it on my new symbol – ₹! All in all, it was a mixture of both micro and macro-economic factors that led to my free fall.
But in 2014 entered a new government, with new promises and new plans. And I was assigned a new boss – the highly qualified Mr.Raghuram Rajan. So, while, the government made policies to attract more dollars through the FDI route, Mr. Rajan (RBI Governor at the time) enforced plans (such as the currency swap facility) to stabilize the rupee. Thanks to this plan, over $30 bn flowed into India in 2013. And an inflow of more dollars always means a stronger me!
Dollars are like the blood that keeps my heart pumping, you pump more of it and I feel strong, but an outflow of it and I go weak!
So my situation was getting better and I was growing stronger. Since then, the only factors working against me were external to my system – Brexit and USA’s efforts to increase interest rates. Both these events made our economy look risky and investors shifted their money to a safer and attractive USA.
Despite all these, my balance of payments situation remained strong because there was a restriction on gold imports and a fall in oil prices and the government was pro-FDI. So these moves brought in lots of dollar bills and made sure not much of goes out! Everything was working in my favour.
While, demon brought back 99% of the hidden stacks of 500 and 1000 rupee notes out of the ‘closet’, blouses and purses and into banks, mutual funds, and stock markets; it didn’t completely drive out black money, remove fake currency or truly help the economy –
- Most people with black money found other people, without black money, to deposit their savings into the banking system for them.
- Lots of the black money in our country is parked in safe tax havens abroad or in physical assets like property or gold, so the exercise didn’t help bring that back
- And lastly, as per RBI data demonetisation didn’t help detect much counterfeit currency used by terror groups as well
Not to forget, the exercise led to a cash crunch in our economy, put pressure on our banking system, led to a slowing of businesses, loss of jobs, a fall in GDP (from 7.9% to 6.7%) and an economic loss of a little over Rs. 1,000 bn. The only positive side of it all was a rise in digital transactions and a change in people’s behaviour towards saving and investing.
So you see it has been a roller-coaster ride for me. There were months when I’d be up, due to a reduction in oil prices, Trump’s sceptical political agenda, Modi’s pro-FDI agenda and GST implementation.
And there were months when I was down. That’s when people used negative adjectives like tanking, nosedive and free fall to describe my serious condition. At one point I was so critical, my rate almost touched the Rs.75/dollar mark in 2018. While my affair with other countries was mostly to blame for my situation, everyone else made it about the ruling government’s poor implementation. They even compared my state to my condition in 2013! Made it a political debate and parties blamed each other for the damage. But in reality, it was due to a lot of macro factors – Crisis-hit Turkey and US-China trade.
Companies were afraid, markets tumbled, and everyone was worried for the economy, except for exporters who were getting more dollars for their exports!
Everyone spoke about their inflation fears, ignorant to the fact, that I had actually outshone some of my peers – the Argentine peso, Turkish lira, Brazilian real, Russian ruble and South African rand, all thanks to our strong fundamentals (i.e. our GDP growth).
Then there was that time when I slipped badly again, due to oil and put the country in massive turmoil. This double whammy of oil prices rising to $100 per barrel and the increasing rising dollar in the range of Rs.73-75/dollar hit me hard! 2018 was just a bad year for me.
While all this was happening, things back at home were not much better. I was stuck in the ongoing tussle between the government and the RBI which left me highly stressed. From Rajan to Patel, finally, I am now at Das’s behest.
Note that a government runs the country, while the RBI carries out its financial transactions.
And when this relationship breaks, it leads to conflict. So first in 2016, Mr Rajan resigned after he felt the lack of support from his political bosses – Mr Jaitley and PM Modi, and then his successor Mr Urjit Patel resigned in 2018, citing ‘personal reasons’. TBH, I saw this coming because weeks before his exit, the RBI and the ruling government were in loggerheads over how much freedom RBI should get to limit lending to the government. So now I’m under the control of Shaktitkanta Das for the next 3 years at least. And like they say, third time’s a charm let’s hope his reign lasts!
In all this, one good thing that did happen was Aadhaar. Thanks to which tracking me has got easier and so has my entry into places. But be warned all these linkages are totally voluntary except for on TRACES (IT website)! From acting as an ID to availing subsidies to opening bank accounts, there’s no denying that Aadhaar is useful. But also highly debated when it comes to privacy concerns. So, linking it to all other organizations is solely at your discretion, with the exception of linking it to your PAN card for filing IT returns which is mandatory. This will help the government keep a track of all illegal dealings and hopefully make me strong in the eyes of the world.
While clearly 2018 was filled with more downs than ups, I’m hoping for a positive 2019 with less drama. And hopefully, it’s actually started on a good note. In just the second month, the US dollar had got my back and together we got the rupee on track. Post the budget announcement, there has been an increased foreign fund inflow in our markets and it has led to a stronger me. Now, let’s just hope this lasts till the end of 2019!