The poor rupee.

Like the national flag and the national anthem the rupee is a symbol of the nation of India. At independence the rupee was at par with the dollar but today one dollar will buy you Rs 62.76. It did rise to 39 to the dollar in 2007 but irresponsible spending by the Congress to buy votes has squandered all the gains. Partly it is because it suits our politicians to show excessive sympathy for the poor, especially during election times, so that they announce large numbers of handouts, such as cheap food, free electricity, free televisions and so on. During the last assembly elections in Gujarat the Congress announced distribution of free apartments for the poor, called the ' Ghar nu Ghar ' scheme. When one party announces freebies other parties follow suit to counter it. This results in mounting deficits and soaring inflation which leads to a fall in the value of the rupee against other currencies because of falling purchasing power. Had the same amount of money been used on infrastructure we would have continuous, cheap power supply and world class roads without toll which would make our industries the most competitive in the world. The other reason is rampant corruption by politicians, civil servants and the police which results in accumulation of vast amounts of black money which can only be invested in property or sent out of the country to secret bank accounts in tax havens. These activities also act as a drag on the rupee because the Reserve Bank is unable to control money supply as no one knows how much black money is circulating in the country, the government cannot tax black money transactions and so has to increase taxes on legitimate activities and there is a huge property price bubble waiting to collapse. Hence the weakness of the rupee. Last year the rupee fell to below 68 to the dollar when the Fed announced a reduction in its bond buying program which was injecting $85 billion into the market every month. The RBI acted by guaranteeing interest paid on dollar accounts, drawing dollars into India. This has now been stopped and the rupee is falling again, not as fast a the Argentine peso or the Turkish lira but gently subsiding like an autumn leaf. In 3 months to January it has fallen by 1.94% and will probably fall more as the US economy gains steam. The World Famous Economist blames external factors for the looming crisis but he is solely responsible for the sorry state of affairs. Poor rupee. Poor India. Poor us.