With the financial biggies like Layman Brothers collapsing and ‘bail outs’ being the flavour of the season, the full-blown financial crisis in the western markets is a well known story by this time. Concurrent with the stock markets crashing worldwide, the Indian Rupee has continued its downhill march over the last few months, finally sliding past the all-time low of 50 mark in the last few days. Not even a year ago, it stood robust at 40 a dollar which we have talked about at that time.
Chidambaram, our smart and suave FM, has spared no effort to pacify things. Come what may, PC is ever assuring. The sweet words from his mouth meant to be vocal tonic for investors could not however prevent the dollar outflow from the Indian market. Foreign investors unloaded their investments from the Indian economy in the face of severe credit crunch in the US and European markets. It is the foreign fund riding on which the sensex had soared to 20,000 mark in the past. The depleting dollar reserve has led to this rupee depreciation & sensex crash.
A weak rupee translates to higher revenues in export sectors for example IT and Auto ancillaries. However, in a globalised market, almost every industry is hit by recession where firms are trying to cut costs and ‘lay off’ seems to be the order of the day.
A friend has observed that the US dollar has itself weakened against Yen which shows how badly the INR is hit. Another opinion which I read in Economic Times is – rupee has not fallen much in terms of most global currencies. Rather it is the dollar, with its advantage of being the global currency, which has strenthened in this period of crisis.
The usual regulatory measures continue, as always. Central bank RBI and also other state-owned banks are selling dollars to prevent further rupee depreciation. What happens in the long run remains to be seen.
{ 3 comments… read them below or add one }
God only knows when our own currency is going to be one of the most valuable..!!
It seems as a package of depletion…huh~~ from IT to auto ancilliaries to deposits to investments…so we gotta wait for occasions like dhanteras where some part of the society ought to deposit some fund…what say??
A decent yield of cereal crops this time can contain inflation. And lowering of fuel prices will only aid that.. oil price has already plummeted to $60 a barrel in the international market and with the elections scheduled early next year centre might soon lower it!