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Indian Rupee Up In Faltering Economy

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Indian Rupee Up In Faltering Economy
[ Business]

Thursday witnessed a strengthening in the Indian rupee, up to 66.85 per dollar from a record low of 68.85 per dollar on Wednesday. The rupee lost almost a fifth of its value in 2013. So what’s a rupee to do?

Indian Prime Minister Manmohan Singh offered to publicly address the situation Friday in a release on his site today. Singh blamed domestic and international factors, including events in Syria, for the country’s financial troubles, which some investors are labeling a crisis.

After two decades of relative success among emerging markets, India’s economy is entering rocky waters, compounded by a multitude of factors. A significant one being US-driven. A US Federal Reserve bond-buying spree under a policy of quantitative easing rushed cheap stimulus money into emerging markets like India’s in an effort to recover the US economy (we weren’t alone). As the US recovered, Federal Reserve chief Ben Bernanke issued a May warning that quantitative easing would end, scaring investors, reversing money flows, dropping currencies and stock markets and causing increasing borrowing costs.

Indian technology manufacturers are warning of possible price hikes in the country though they have yet to make decisions while monitoring the rupee’s progress. Manufacturers’ Association for Information Technology forecasts IT hardware price increases of up to 10% if the rupee fails to sufficiently recover. Mobile phones could see price hikes of up to 8%. Impact on US consumers is as yet undetermined.

One plan to alleviate the situation is to buy gold from citizens. The pilot project by the Reserve Bank of India calls for commercial banks to purchase the gold and send it to precious metal refiners. Gold is the country’s second biggest import, oil being the first, and proponents believe even a small supply of gold will be beneficial. Some have even suggested buying gold from Indian temples to supply the domestic market. Temples in the country may house several thousand tons of the precious metal. In Indian culture, gold is practically part of the family and is to Indians as the single family home is to Americans.

Other at-risk economies include Brazil, China, Indonesia and Thailand. In a 24 August address, International Monetary Fund Managing Director Christine Lagarde cautioned against pulling out of these emerging economies too quickly. “Global policymakers–all policymakers, within countries and across countries–have a responsibility to take the full range of actions needed to restore stability and growth, and to reduce imbalances.”

Indian Rupee Up In Faltering Economy
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  • Shailendra Sial

    Kristen, why have you used Pakistan’s currency’s image for this article?

    • Kristen Foster

      Thank you, you’re absolutely right. Trying to fix it.

  • Milind Khangan

    I think, investment in Gold can save rupee. The government and RBI need to release more money in market so that this fall get stable. But, government need to focus on current situation instead to focus on long term strategy.

  • Kristen Foster

    Thank you, just fixed it, unintentionally missed the forest for the rupees!

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