Rupee Reality |
For decades, India has treated the rupee less as an economic instrument and more as a symbol of national prestige. Every fall against the dollar triggers familiar anxieties: television debates about “currency collapse,” demands for central bank intervention, and calls for patriotic restraint in spending foreign exchange. Yet the present turmoil in global energy markets is exposing an uncomfortable truth ~ a weakening rupee may be painful, but it is also performing an essential economic function. India’s vulnerability begins with its dependence on imported energy.
With crude oil prices surging amid instability in West Asia and shipping disruptions around the Strait of Hormuz, the country’s import bill has swollen rapidly. At the same time, nervous foreign investors are pulling money out of emerging markets, including India. The result is straightforward: the demand for dollars has risen while supply has tightened. Under such conditions, pressure on the rupee is inevitable. The instinctive response is to resist depreciation aggressively. Governments fear inflation, rising fuel prices and the political optics of a falling currency. But exchange rates are........