Why is Indian rupee weakening against other currencies? - letsdiskuss
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Jessy Chandra

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Why is Indian rupee weakening against other currencies?


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Indian Rupee is among the worst performing currencies in Asia in 2018. Yes, even worse than that of Pakistan’s. On June 28, it plunged to its all-time low, breaching the mark of 69 against US Dollar.

This is a MAJOR concern. A depreciating INR means the cost of imports will rise. And given India is still an import-dependent country, this likely would pave way for either inflation or unemployment (we’re already struggling with the later one). India’s trade deficit is high, and it’s likely to climb further high.

In fact, according to Bloomberg, foreign investors have already lowered their holding of rupee-denominated government and corporate bonds by a whopping 4.4 billion INR.

The falling value of Indian Rupee is, in part, due to the rising price of oil, the possibility of a trade war between USA and China and the demand of USA to stop oil import from Iran. Other major economies, too, are struggling to hold the value of their currency in the global market.

While many commentators believe there isn’t much to worry about for India, the current scenario can easily lead the country to many economic challenges, including halting its GDP growth, which already seems stagnant.

I personally believe that we’re already hit by major unemployment issues; the data really do not do justice with the kind of joblessness we have in India. If Indian rupee continues falling in value, we might have to face hyperinflation, which can even be beyond the control of RBI. And if that happens, it would hurt nearly a billion people in the country, pushing them to or beyond the lines of poverty.

In the runner-up of General Election 2014, many claimed that Modi government would improve the value Indian rupee; taking it to INR 40 for $1. Many even said that after 5 years, we might even see that 1 USD would cost 1 INR (stop laughing!). Sadly, not only the situation didn’t improve, it got worse. And what’s sadder is that no one on TV media is really talking about it!