I am shocked and amazed to note that the Indian Rupee has fallen to 56 to the greenback. That just does not make sense. The Oil price in India has been hiked up by 7 rupees per litre, that's almost ten percent. The government blames this measure on the world situation. Yet the price of Oil in dollar terms has been downwards over last two and a half weeks, and, according to one trading member of the New York Stock Exchange, could even go down to $80 per barrel for the West Texas Intermediate or NYMEX Crude.
Is India existing in a different world, in a different time frame, where global effects are having an impact after some delay, to the extent that there seems to be a disconnect? When no major infrastructure projects which need international input are planned for the next two years, what is the purpose of dollar inflows into the country? Why should the hard work of so many millions of people become so devalued? Why should the Indian currency, which bears the picture of Bapu, be allowed to depreciate so rapidly, if at all?
India is in a growth phase, with lot of need for infrastructure, definitely, for the next twenty years or so. As part of the global growth and Recovery saga, India will grow apace. At the moment, it's main problem is the question of inflation and key interest (repo) rate. I believe that by reducing the latter, the former will be tamed, paradoxical though that may seem. When Western economies are having a growth problem with interest rates at record low levels, how can India afford to keep rates at 8 percent? It is a stifling measure for growth, and sooner this constraint is removed the quicker growth can resume, and the Industrial production pick up steam.
The Reserve Bank Chairman Mr Durruvi Subarao, is inspired by the hope he sees in the eyes of young Indians. They must have access to cheaper money to fulfill that promise. Indian industry as well as consumers all need cheaper money, for growth to continue. May that cause heatmaps of happiness in India, and for that I pray.