How many whammies will we face?

"Commentators who claim that the precipitous fall in the rupee is the cliched 'blessing in disguise' are missing a number of profoundly critical points," wrote A Barua. For one thing, this is not the 'calibrated depreciation' that would give exports a nudge. Instead, it is a 'run' on the rupee riding on capital flight that needs to be addressed squarely. It is true that other currencies are depreciating as well but we are beating them by a mile." The Turkish lira which traded at 3.5 to the dollar in 2017, when Donald Trump was sworn in, was trading at 6.0853 yesterday. Turkey was downgraded to three notches below investment grade by Moody's and four notches below investment grade by S&P. "By making the currency more difficult to trade and limiting the ability of both domestic and overseas banks to hedge their currency exposure, the decline in the currency could well regain its pace in the coming days, after last week's late rebound," said M Hewson, chief market analyst at CMC Markets UK. Why is the rupee falling? "The weakest currencies have been the ones with the most external hard currency borrowing (Turkey), political turmoil (Brazil and Turkey) and/or the highest current account deficits (Paksitan, 5.7% of gross domestic product). A stubbornly high oil price has added pressure on currencies like the Indian rupee and the yuan," wrote N Ramachandran. Emerging markets are facing a double whammy from the US Federal Reserve, said Reserve Bank Governor Urjit Patel. "Given the rapid rise in the size of the U.S. deficit, the Fed must respond by slowing plans to shrink its balance sheet," wrote Patel. " If it does not, Treasuries will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond market is inevitable." Actually it is a triple whammy. The Federal Reserve is raising its Funds Rate, the Fed is gradually selling bonds it acquired during its quantitative easing program and will also have to borrow more to fund increasing fiscal deficit due to tax cuts. Higher interest rate along with tightening dollar liquidity is making the dollar strong which is bad for emerging markets. Why? "In 2017-18 our import bill for goods exceeded exports by $ 160 billion and is likely to be about $190 billion this year. Depreciation makes imports dearer and exports cheaper." So, that should be good. "However reams of studies have shown that a weaker rupee does not by itself boost the volume of exports." India's economy grew by double digits twice during the Congress led UPA government, wrote AR Mishra. How did they achieve this miracle? "Some economists and political scientists suggest that corruption is a lubricant for faster growth," wrote A Maira. There was certainly a lot of that during the previous government. Raising interest rate in India is not enough. The Reserve Bank should raise foreign exchange by issuing dollar bonds to Non-Resident Indians, thinks Barua. But, that will add to foreign currency debt. We have to increase exports any way we can, wrote A Kant. But first, we must deal with our whammies?