Is the Indian Rupee Really Touching 94 Against the Dollar? Here’s What the Reality Looks Like
With panic and misinformation being thrown around in social media at this point, one of the recurring questions in the past couple of weeks is: “Is 1 USD really worth 94 INR? And are the policies of the present-day government destroying the Indian economy?”
But before we dive into all that, let’s try to get a hold of the facts.
What Are the Actual Figures?
First things first: there has been a rumor floating around regarding an exchange rate of roughly 94 INR for 1 USD. In reality, the current exchange rate hovers around 83.5 INR against 1 USD. One year back, it stood at about 82.8 INR. Therefore, in one year, the rupee did not lose 9 to 10 rupees.
What is Causing the Devaluation of the Indian Rupee?
Does this have anything to do with the Modi Government? Not really. Currency devaluation is an intricate global process, and currently, the US Dollar is extremely powerful.
The main reason is the Federal Bank of the United States. In order to curb inflation, the US increased its interest rates. This resulted in foreign investments being withdrawn from developing economies such as India and invested in the US, which offers high returns. Additionally, India’s crude oil imports are around 80%. Therefore, whenever the cost of oil rises globally, India needs to pay in dollars to purchase it.
Is It the Fault of the Government’s Policies?
It’s completely legitimate for the citizenry to question economic policies. Although global issues impact the strength of the dollar, local policies are part of the reason why the rupee isn’t as strong. Dependence on imported oil along with the slower rate of exports than imports does place some stress on the rupee. Nevertheless, it must be understood that all major currencies including the Japanese yen and even the British pound have been weakening with respect to the US Dollar recently. To blame just the local policy is to overlook the storm in the global economic world.
Will We Reach 100 INR to 1 USD Very Soon?
It’s very easy to feel threatened about crossing over 100 INR, but to assume that it will happen “very soon” is rather far-fetched. The RBI is doing everything in its capacity to defend the currency through its intervention in the market and foreign exchange reserves. A plunge into 100 requires a global catastrophe.
However, the steady descent to 85-90 over the next 3-5 years would be a standard economic trend for any developing country like India.