If you are an Indian, or know an Indian or read newspapers from India, there is a good chance you have read about the great Indian rupee meltdown of 2013.
I know I’ve personally (my gadgets cost more) and professionally (my company needs to import hardware) been affected by the free-falling value of the Indian rupee against most global currencies (atleast the ones that matter to a buyer – the USD, GBP and Euro).
Lots of pundits have their opinions of why is it falling, how to stop the fall, why to let it fall and even how it is a political problem.
My take on this subject?
Well, why shouldn’t it fall?
I mean, currency fluctuations are a global phenomenon and based on various factors. The simplest of those factors are “supply and demand”.
The Indian rupee is not in as much demand as the dollar is.
1) India needs dollars to buy it’s oil, electronics and other equipment. It has no control over the dollars in it’s pocket. It needs to buy these dollars. Lots of them.
2) India has enough rupees and can print more if it needs. But no other country needs “rupees” as badly or in as large quantities are India needs dollars.
If this supply-demand ratio changes, we could be having a different conversation at that time. For now, nothing will help the rupee’s slide because the infrastructure to manufacture more stuff that other countries need and are willing to give India more $$$’s does not exist.