Still there is sadly a lot of corruption and mafia gangs involved in the Indian bureaucracy and the economy. It is so tough for the small business owner.
Exactly , posing hideously as showing both views but showing strong bias for one side is the what i feel while listening to Shekhar Gupta . He is saying that India should let the rupee fall freely without making sense of geopolitical consideration going around in the world . America can freely print all the paper money called dollar and buy NATURAL RESOURSES of the world . Its just backed by US hegemony and if it is threatened people might loose trust in it and it will devaluate . Better to Buy Gold from that dollar right now , slowly , overtly and covertly .
@@GautamMahara-k1q reserve banks around the world generally have a mix of both precious metals and foreign currency because gold is a hedge against inflation, but currency is the definition of liquid which helps in maintaing day to day operations in currency exchange to ensure smooth payments for importer/exporters the US dollar can really only be replaced by another currency whatever it may be not by gold
The RBI spent from its reserves to shore up the rupee to cushion it during the earlier phase of Russia Ukraine war. India lost some foreign reserves then. This is known to everyone and the RBI governor himself had come on TV and said the same. Were these economists sleeping under a rock on Mars then? But the things have turned around pretty quickly and the fact that the reserves have increased quiet rapidly since then shows that RBI is doing the right thing. The price control that the central government carries out is an essential component of controlling inflation and this happens everywhere in the world including in the US. This government should get credit for having inflation under check compared to the earlier regime where even a small incidence abroad was used to rip the Indian citizens of hard earned savings by artificially devaluing rupee and increasing inflation. Who can forget the times between 2011 and 2013? I am surprised though that these journalists do not have any wisdom to share when US Federal Reserve is brazenly managing dollar's value while at the same time its printing money left right and center, but had Indian policy decisions compared to failed economies of Zimbabwe, Afghanistan, etc! This hit piece is for those corrupt opposition politicians and their pet journos who have cash abroad and want the most buck in rupee terms than for the common good of Indian citizens. Those days are long gone
Some people need to pull their head out of the 56 inch tongue's ass and stop ascribing ulterior motives to any journalist who criticises the tongue's governance. Shekhar has given well reasoned, well researched arguments here. Maybe he is right, maybe he is wrong. But there is no reason to be butthurt. The 56 inch tongue and its chamchas aren't the only patriots in the country.
@@HarmanHundal01 First of all you need to read clearly and comprehend accordingly and before that, go through the video again. Shekhar explains with great pain that its not his research. Then why are you attributing it to him? Shekhar himself admits that all economics is politics, so why can't it be this research that he quotes from? Every propaganda is backed by research and statistics with cherry picked data. Why are you getting offended personally? It's not going to grow your 2 inches any longer
@ You respond with yet more daftness. I was commenting about the mind numbingly stupid tenor of your comment. For 56 inch tongue’s chamchas like you every critic is a conspirator against Bharat Mata. That is an assholish perspective, sorry to say. Stop wasting your life in this chamchagiri and start putting your points across more politely instead of frothing at the mouth in agony everytime someone finds something wrong with the 56 inch tongue’s policies.
@@sameerthekingcobraGupta himself is not sure if currency manipulation is happening or not. He is basing this opinion on some commentators columns that Inr is unduly supported by RBI. What is the proof? And Mr Gupta himself agrees the street value of dollar has not increased in india. If INRs value was really heightened by currency manipulation it would have been certainly reflected in the its street price
The argument is flawed. As long as the RBI is trying to set the price through market trades (buy/sell USD) then supply will meet demand. Hence there is no black market created. If the price is set by diktat, then a black market is created.
point is wherther its RBI or market makers if big forces plays with the currency trade for a long period of time it will create imbalance. simply saying its done via market trades so that why okay is not correct IMHO
RBI "trying to set the price" is the issue here, supply-demand is something that markets take care of and no entity is smart enough to somehow setup a system where they can dynamically match supply and demand
point is rbi SHOULD NOT be setting the price. of course it has to go by market trades (what other way is there for such an open economy?) but artificially keeping the value of currency low or high catches up to u since it does not match the macro fundamentals.
Socialism is so deep from general politics from Nehru Gandhi family that we as nation don’t even know what’s good for us. Ex agricultural reforms. Gupta ji agrees.
Extreme one sided view . If rupee depreciated at faster rate then IT & pharma exports will be high . So will be the inflation & low FDI as the currency is no longer stable to do FDI & FII higher investments.
Controlling inflation is the key to seeing a stable rupee. Our key import causing most deficit are - crude oil, natural gas, pulses and edible oil. Renewables policy, and National Pulse and Oilseeds Mission is already working towards reducing these imports. Regarding exports, our exporters should focus on competitiveness. Some of the blame should be put on states, that cross-subsidize energy costs to give freebies. And also, wastage in farm subsidy needs to be controlled.
RBI may be pegging the dollar to limit inflation which is a major KPI for RBI. Cheaper rupee will make oil cheaper and which will keep inflation in check. Why should everything be seen from the prism of politics or nationalism?
This is rather one-sided. Maybe Mr. Gupta should at least quote what our excellent RBI Governor Shaktikanta Das has said on this matter: “Rupee is a freely floating currency and its exchange rate is market-determined, RBI doesn’t have any fixed exchange rate in mind. The RBI intervenes to curb excess volatility and anchoring expectations," - It seems he is very clear, and doing a great job - increasing our reserves by about 100 billion or so in the last year and a half, while reducing unnecessary volatility caused by temporary, speculative flows.
@@ashutoshpandeyz4508 It's sad to say that you are probably right. This is hardly surprising news - as Shaktikanta Das says : "After all, this is the very purpose for which we had accumulated reserves when the capital inflows were strong. And, may I add, you buy an umbrella to use it when it rains!,". Why not present this side of the story - which is quite simple and commonsensical?
@@SamirSeth That's not what he said, money being freely floated is comparative to the previous regime of license-raj, however as was apparent from the sources that were shown in this piece the govt is trying to meddle in the exchange rate more as it used to do few years ago.
@@devilsmirk5826 What Mr. Gupta is doing is conflating managing volatility and keeping rupee high. The RBI governor is very clear that he is only ensuring volatility (caused by speculative / temporary inflows or outflows) is kept low. This is not "meddling" - this is one of the reasons we have accumulated reserves in the first place.
@@SamirSeth The line b/w what meddling and "ensuring volatility" seems to be quiet thin in your case, if artificially keeping currency high for a 5 year period is not meddling then what is?
Mr. Gupta, perhaps you should have spoken to your staff economist before posting this video. The primary factor that determines exchange rates is relative inflation rates between the 2 markets you want to compare. In this case the US and India. Prior to the inflation targeting regime, average rate of inflation used to average between 8 to 12 percent. Over the last 11 years it has ranged form 2 to 6 percent, and on rare occasions breached those barriers both ways, i.e. going below 2 for a while and also a little above 6 for a while. At any rate the US has managed to keep their inflation rate at 2 percent historically. So instead of having a relative inflation gap of 6 to 10 percent before 2014, we have been able to stabilize the gap to 2 to 4 percent. The decline in average inflation rate has mostly been market driven, with better fiscal management and the formalization of the economy. When you have nearly 200 million Indians participating in the stock market, that will have put an upward pressure on the exchange rate, as even if FIIs sell the significantly larger number of domestic investors in the market can minimize any drastic negative impact the selling off by FIIs have on the Indian financial system. The one last thing I would like to point out is we are now doing all our trade with Russia in Rupees and Rubles. So any dollars we might have needed to buy oil or any thing else from the Russians previously is no longer required. Therefore RBI does have the luxury of selling dollars it does not need to buy oil from Russia that it would have previously have needed in reserves, Further we are buying oil from Russia at a discounted rate and selling it to many countries especially in Europe at a markup as that is what a good business man would do when such a chance for arbitrage exists. This is purely market driven and not a sign of a mai bap Sarkar. The recent stability of the Rupee has more to do with the new conditions prevailing in the global markets than any unnecessary intervention on the RBIs part. Ant if anyone thinks Russia will not sell us any more oil in Rupees because they can not use it, that has been proven wrong. We have been trading with Russia without using the dollar for over two years now. If the Russians could not sell us the oil for any thing of real value in exchange for the oil supplies, they would have halted exports a long time ago. Despite what Brown Sahibs educated in Ivey league schools think, and regurgitate as if they are a priest of some God's temple, perhaps you might want to talk to people who are capable of independent thinking, before producing such videos. The world is changing.
1. Selling dollars and buying gold (most EM CBs are not just on buying spree but also bringing it home) is a winning strategy when the dollar is overinflated compared with all major currencies. 2. Poor fiscal management in US is pushing their yields up, the yield differential on a 10 yr bond with India has reduced to a historic low of 2.5 percent. If it was not a sharp spike from 75 to 83 in 2022 due to ukraine war, the currency would have been 80ish per the inflation differential logic. 3. Listen to Russel Napier if you will, you will get the idea how china’s manipulation of its currency was instrumental in driving consumption growth in US, with the RMB moving very little for 2 decades despite the exports surging multifolds. With interest rate parities and other theories of economics, chinese RMB was worth more vs USD, if not less.
The onion analogy for currency was naive - at many levels; perhaps, borderline childish. I think: though journalists, as individuals, ought to have the right to personal opinion, they shouldn't be allowed to express such opinions via journalistic means.
Hey SG, loved the episode, but I think the arguments need a bit more nuance. I'm purchasing a "Super Thanks" so that my comment catches your attention and you pin or like it for other viewers. While I am in favor of depreciating the rupee, the current trend of stable prices is not because of "currency nationalism." Here are a few points from my side: 1. In 2016, the Modi government introduced an inflation-targeting mechanism and set up the RBI's Monetary Policy Committee, which was mandated to keep inflation around 4%. It has been mostly successful in this regard. As a result, the divergence between inflation in the US and India has decreased, contributing to the stabilization of the exchange rate. 2. Although India's export growth has slowed, the last few years have seen subdued global demand. However, India’s services exports have grown substantially during this period. Beyond IT services, there is growing optimism in higher-end services, thanks to Global Capability Centers (GCCs) that are setting up in India. And remember India's exports are primarily in services sector. 3. India's oil intensity by GDP has reduced significantly in the last 10 years (by more than 60%). This reduction has also contributed to exchange rate stability. So, while it may seem that the RBI is controlling exchange rates, these structural changes in India over the past few years are worth considering.
But RBI does inject dollars in the market. While I agree with your points these points don't explain RBI intervention. Assuming your points are true then RBI shouldn't intervene as rupee will correct itself automatically but that isn't happening.
@@DataCrusade1999 As somebody said in a comment, the RBI spent from its reserves to shore up the rupee to cushion it during the earlier phase of Russia Ukraine war. India lost some foreign reserves then. This is known to everyone and the RBI governor himself had come on TV and said the same. Those were extraordinary times and we were just getting out of Covid shock. Things have turned around pretty quickly since then and the fact that the reserves have increased quiet rapidly shows that RBI isn't doing anything wrong. As far as intervening is concerned, it's done as per a well defined mechanism set up by the RBI. Every country does that, the worst being the Federal Reserve 🙄. It's perfectly nomal
@@VikasAlva I'm sure RBI has a mandate, but let the market decide the rate. RBI Governor took umbrage when IMF said that rupee isn't free but artificial. Sudden up and down movement is what RBI should be concerned about not keeping rupee at 84.
I would add that fiscal deficit has been largely significantly lower. When your fiscal deficit comes down the forex rate goes stronger. This is basic macro economics. Also inflation under control is also a result to some extent of the fiscal deficit being under control. If we move to a fiscal surplus position - that is what happened in the Vajpayee regime - the rupee will go super strong or tend towards it. If I remember right we saw a visible strenghthening of the rupee during that period of Vajpayee regime. We also saw a trade surplus and the forex reserves crossing the 100 billion dollar mark at that time. So the arguments being given by Mr.Gupta are based on micro factors of forex trading whereas the macro economic factors all suggest that rupee depreciation is behind us to a large extent. In fact why do we need 700 billion dollars in forex reserves? We can invest a good portion of that money in the Indian economy instead of giving it out at abysmal rates of return to fund the dollar economy. So there are a lot of factors that are not come out. This article is not cutting the clutter in any way
@@DataCrusade1999 I don't know what are you talking about. I have never seen rupee stuck in at 84. Rupee is at 84 now, it wasn't so just a month ago. I dont think RBI has any intention to keep rupee at any particular level, it just wants it to be stable. This is evident from the Governor's commentaries and interviews. It has slipped in its value steadily in the last two years
So many loopholes and oversight in this piece! 1. Inflation has been curtailed in Modi's second term (Modi doesn't deserve all the credit there, barring some like buying oil from Russia). 2.Currency valuation depends a lot on country's economic activities, exports and imports. We still have higher imports compared to export. 3. Modi govt has been punching above their weights in international standing for India - much more successfully, and at that table the countries with more stable currencies have a better say on matters. 4. If India wants other countries to do trade in our currency, our currency must have stability which attracts them to save in our currency. 5. Weak currency doesn't always mean higher exports. If so Zibambwe, Argentina, Venezuela etc would have been export powerhouse of the world! All above points and many more that I couldn't think on my feet have been missing in this piece!
@@Asura_clanThat gold is owned by India only. Just that location was changed. These days, you never know, if West can confiscate our reserves, like they did with Russia's dollars.
@umang your points sound nice but aren't supported by economics. As a MSME manufacturer, imports are cheaper than what we produce. We are subsidizing the imports, rolling carpet to them so that we die of starvation. Before you accuse me of illiterate, I have MBA in finance from very reputed college. ✌️
You force non-economists to watch your video twice / thrice, Shekhar! Excellent information as always! It definitely brings in a new perspective to the age old misconception about a stronger currency being better than a weaker one.
Huge! Been trying to trade on my own for a while now, but it isn’t going well. few weeks ago I lost about $70,000 in the trade. Can you please at least advise me on what to do?
Robert platform maintains a unique perspective and is very transparent with their investors. Regardless of whether or not he outperforms. I will forever stay invested!
The Same argument has occurred in the USA. While it remains the largest precision manufacturer in the world, the lower cost manufacturing was not lost. Since WW2 the USA had no industrial policy until 2017. Both administrations have continued the policy. National interest had been neglected for short-term profits. Less so in Europe and Japan.
dollar Rupee exhange rate : How it affects a common man ? This is happened to me I bought external hard drive for 8,500 Rupees in 2021 . Yesterday in 2024 I bought same HD for 10,400
An excellent choice of CTC today. It’s something that should be more in news and there should be more opinions in print and video media. SG sounded careful in expressing opinion but nevertheless the concern was evident. I believe, that’s, as SG mentioned, because the economic editor is away. Exports coming down by 50% is a huge concern. We should be looking at experts on suggestions on how to raise the exports and at govt on the steps being taken to shore up the exports. I hope there is a review of progress on this on CTC after a quarter. This CTC should be viewed as sounding the bugle on this slippage of exports.
Shekhar ji , sorry to say but two very important data points you’ve missed out on : 1. The currency depreciation of any developing economy has to be seen in comparison to the currency performance of other similar size emerging economies . 2. It is perhaps not correct to assume that export performance is hindered by a non depreciating rupee only - being an exporter I can tell you that there are a whole plethora of reasons for low export performance from india - some of them being - large economies like Europe doing poorly , global trade uncertainties due to conflicts , high import duties in india for key raw materials , export incentives being reduced by Modi govt in india as an act of fiscal prudence . 3. Another big reason for low exports is also the high domestic demand in india presently where a lot of producers just don’t have the time to focus on exports .
Rise in export competitiveness with depriciating currency is a simplistic economic argument, this holds in theory but not in practice for india bcz india does little value addition to imported stuff and exports it like api to medicine, engineering goods and refinary products. If import is costly then export becomes costly. This being said allowing currency to depreciate in an orderly fashion is logical but saying it has such a huge impact on export competitiveness will be an overstatement
Another way of looking at it is this: Have the foreign exchange reserves increased or decreased from 2022. They have increased. It is more complex than that. One point I would like to make is that, post the pandemic, when the developed world was hit by inflation, India had a sedate inflation regime. There are complex elements at play. I doubt even the central bank or the economists really understand them. Interest rate and inflation rate differentials. Terms of trade - Is what is produced in India more valuable than it was a year ago. This is relative. If the Indian goods and services bundle gains by 2%, and another country one's gains by 3%, then the rupee should depreciate by 1% wrt to that country's currency. Capital inflows and outflows. Expectations and speculation. ...
If Exports have come down to 50 percent , How the Forex Reserves have gone upto Reasonable/ Satisfactory levels ; Is it by magic (or ) Is there any logic ; What the Finance Minister / RBI Governor has to say on this !!!!!! Media talks are OK and informative ( mostly highly opinionated) as they do not have to walk the talk !!!!!
Before anything, I want to make something very clear. I used to sell a bag for ₹8500 in 2020. That was $115, now it’s $95 give or take. You know what’s not gone down? International shipping rates. Barely anyone is India is buying at these prices in India, to ship to UK, my total cost ₹12,0000 total. In 2023, I have to change my price everyday to justify why I suddenly need to change ₹18,000 while incurring lower profit for the same bag and feel like my work isn’t worth anything. Shipping cost is worth more than product, bye bye business. Secondly, I’d like to point out that this is a Completely flawed ideology. Competitiveness of economy should be based on development of value added products and cannot be compared to essential commodities. Onions and pencils, both are basic and essential products. It is essential to keep these commodities at a fixed rate to ensure stability. This idea of letting pencils and onions fluctuate is going to collapse the value added section of the economy. Market economies work very different from how you’ve explained, governments play a large role even in the west to balance the currency value. On the other hand, If the free market should flow based on your ideology, why artificially horde the dollar rather than letting the market take charge? What was the point of having foreign exchange reserve if not to balance the rupee value? On the last point, artificially subsidising import goes against the idea of self sustainability thay India prides itself. Also this subsidy only benefits large corporations and businesses and devastates locally owned business and high value export products. It’s a travesty to see such a complex topic be so badly analysed and explained.
India’s best bet is to deal and buy crude oil in non dollar currency. Except for oil other commodities can be bought in dollar and US can to convinced to see this as an exception
One of the most developed economy south korea has even worse dollar won ratio than rupee as long as u have strong macroeconomic fundamentals, this debate over rupee-dollar is futile, rbi now has close 700 billion dollars foreign reserve any heavy fluctuations will be easily handled by them,
These articles are too theoretical. Practically, stable & predictable exchange rates are better for business people. Forex reserve of 700 billion is too much for India.
Couple of things Mr Gupta missed here is 1) if the price of Gold rises, then the govt will run into trouble because it created SGB without holding any gold. 2) the weeker currency is net beneficial for a country if the country is in trade surplus. Thats is simply not true if the country is in trade deficit. 3) India is a oil importer country, if rupee depreciates then the higher price of oil will lead to higher inflation which will be a problem. 4) Holding an ever increasing amount of dollar reserves is not not great compared to holding an ever increasing amount of gold which RBI is currently doing, because the value of dollar depreciates where as gold appreciates.
Buddy why do you say that GOI holds no gold against SGBs. At last count the GOI has reserves of 840 tonnes which are more than 5x of all the SGBs issued.
@@gauravtamhane Thats because that 840 tonnes of gold isnt against SGB. That is national gold of the country and belongs to every citizen of that county. THAT GOLD WILL NOT BE USED TO GIVE THE MONEY BACK AGAINST SGB. If push comes to shove, the govt will rather print the money. ALSO GOI cant use that gold to settle SGB because there are legal hurdles as well.
Not an expert but I think the pencil analogy is bad. If government fixed pencil price artificially then that would be like doing it out of thin air unlike central bank selling dollars to satiate the dollar demand.
Key factor in India's foreign trade is going to be reduction of our imports from PRC with the slogan of Atma-nirbharata (self sufficiency). The stable & long term strategy lies in copious production of Si metal & ICs called "chips" (at least the low-end chips the advanced producers have moved away from, but have a huge demand in India & otherwise). If India sets her mind in it, she can become a huge manufacturing hub, in global supply chain.
Is government artificially keeping rupee stable so as to keep big traders happy on cost of MSME development? If rupee gets weaker(street price)i.e 90-95rs to dollar, our MSME can double or triple the exports as we become competitive. No wonder modi is surrounded by importers at dinners and MSME is for only photo covers
If that is the case … US would have never used its strategic oil reserves to manipulate crude prices … Countries are sensitive to some commodities.. so we cant use the same brush
It is with the assumption that Dollar is going to be strong currency for ever. We need to move out of Dollar slowly. World leaders are now planning to bring down its dominance. Then you may have to rewrite your analysis.
we should focus on improving the quality of our exports and building resilient customer bases, more than worrying about making our exports being "more expensive" and losing their competitiveness. The better our products the more they will withstand an appreciation of the ruppee. Yes this can be debated back and forth, but this is just my opinion ::)
Has anyone seen the movie 'Shakti' starring Nana Patekar? Karishma kapoor gives SRK US dollars & said $1 = 48 INR. SRK in the climax kept on repeating 48, 48. And today USD 1 is......... Well
Very bad analysis. As per your argument, China which pegged it's exchange rate to the Dollar for the last 2 decades was foolish? There are trade offs in each scenario and the Indian Government economic leadership decides to what's in the best long term interest of India, according to the continuously evolving macro conditions and Geo politics.
I remember the headlines when Bharat's USD reserves were just shy of $600B. There were breathless headlines from the gyani every time they dropped by $1B. I now suspect there was some wider coordination behind the headlines.
Strong rupee? What? Rupee was at 75 to a dollar just 3-4 years ago. Now it nearing 85 to a dollar. I don't think that counts as stronger rupee. And what exactly is India producing that is being exporting in large quantities and which other countries are not able to buy because of this so-called strong rupee? And isn't it contradictory that if the rupee weakens further then the forex will go down not up? It seems like we are in the same era as Russia was in 1990s during which the Western puppet Yeltsin weakened the rouble and Russian assets were sold to Western oligarchs. Thankfully for Russia they had Putin after that horrible saga ended. Will we find our Putin?
Always have this argument of opposing the currency manipulation but in 2014 rate was 60 ..but now it is in 80s...but what about exports growth So don't give a blunt argument in favour to it over export competition
It’s so frustrating to see that even in 2024, we’ve still not learnt the lessons from the licence quota Raj, or better yet we refuse to learn those lessons.
The movement of our currency on a bad day is something to see. The next day after that, you'll get a better understanding of the policy than any economic article can give you. If the rupee starts the day by depreciating a lot, it usually goes back up to a higher level by the end of the day. But the next day it covers the gap. The RBI is trying to make the rupee weaker against developing countries and stronger against developed countries, which actually hurts both imports and exports.
This is a joke of an article. The market value of the rupee would be higher if it’s allowed to float. The economist at the helm of ThePrint seem to only look at trade forgetting capital import and remittances.
How convenient to remember 4 years of Bajpai govt and jump to 12 years of modi govt saying , they had 400 billions of reserves, this intelligent guy scapes the entire 10 years of Manmohan singh government . Best of godies
I disagree with Subramaniam's view. As you have observed yourself- the exchange rate with the dollar is a matter of fierce debate between economists. The RBI's job is to act as a shock absorber between the consumer and the market and to stabilize the rupee -dollar rate as far as possible; slow down an abrupt rate of change which delivers more of a shock than the same change compounded over time. And to say-" oh RBI lost x billions" is disingenuous because they make no comment when RBI saves the same amount at another time. And to adopt the US disapproval of "interfering with the market" is wrong. They evangelize for US benefit. The market can deal massive blows. This is a job for the RBI and the Finance Ministry- not sundry economists.
The amount of borrowing & money printing done by the US is insane. Any other nation that does it, will find their currency worthless, inflation at 1 million % & the economy collapsing. The way the US escapes this fate is by controlling the Fx price discovery mechanism
If imports exceed exports, then it seems to me having a weak currency hurts you, and vice versa. It is also true that if your currency strengthens, exports suffer, so the moral of the story is clear to my simple minded brain. For a strong kick-butt economy, reduce your imports relative to your exports. This is what China has done, and now they are kicking butt. Import substitution is the key, and this does not happen overnight. China started with cheap plastic toys and chairs and tables and moved up to electric fans and refrigerators, then to solar panels and batteries, and are now making electric cars. This is not just a matter of currency manipulation -- they are actually making stuff, and pretty good stuff at that.
@22:08Crux of this episode is "All Economics is Politics" No wonder so subramnium and josh felman disguised their political will as economic hypothesis .
Tourism in India has a tremendous potential to earn foreign currency besides export of goods and services. Only if the law and order situation in our country was not getting from bad to worse. Single women around the world have increased solo traveling. How many women around the world would be comfortable traveling solo around India?
SG Sir you should stick to politics and history. If you try to mix politics and economics then there is more clutter. How does reducing import tariff's reduce forex outflow? Instead lower prices will further increase imports resulting increased forex outflow putting further pressure on the rate of the rupee. There are far more topics up your street that you should address.
One case I can see lower import tariffs decreasing forex outflow is if the imports in question are goods needed in the supply chain for the manufacturing of a value added final product (kind of like how we import crude oil and export petroleum derived products).
Was the Ans in your explanation? Strong currency means subsidized imports. What is India looking to Import? Defense equipment. India is expecting and preparing for upcoming war.
Weaker Rupee as compared to USD is a lifeline for NRIs. Whose entire existence is dependent upon this high Exchange Rate between USD & INR. Which makes a half decent salary of 70,000 USD per annum in USA to 6 million INR in India.
Not true. NRIs who remitted money in 2014 and earned interest on those deposits,have lost all the gains because inr has depreciated by more than 38% in last 8 years
One sided and biased view . India avoids western pressure by balancing exports + remittances with imports. Economy with such a political bias is very clear .
There is no free floating currency, by changing interest rates the federal reserve essentially affects the availability of dollars not just at local market levels but at global levels.
Sir the argument you are making was built in response to East Asian financial crisis. The targeted countries pegged their currency and their financial system let in big flow of short term debt as they had no capital control. The crisis was planned well to exploit this weekenss, when Wall Street triggered their exit of short term debts and hedge funds started selling targeted currencies, currancies had to be devalued as US blocked other countries to lend USD and wanted IMF to interfere in order to impose Washington consensus which would be in their benifit. Wall street and US was the sole superpower then and it was no use negotiating or fighting them, so in order to prevent it countries started building larger reserves and putting capital control on short term debts. Also the other reason was to build savings for imports. The conditions are different now, both US and Wall Street are not sole superpowers, while US is volnerable due to its high debt and weekening millitery and Wall Street is in old system driven by greed that would self canabilise itself if it stretches too much. There are many other countries with sufficient USD reserve to lend now as seen with crisis in Srilanka and Pakistan which was not possible earlier and India has capital control and strong domestic financial system to counter sudden rugpull. India might be joining other countries to lower its USD reserve as it can use the opportunity to push its own currency system for international patment. The savings it can get from holding billions USD bonds at 2-3% rates leading to loss of over 4-5% annually due to inflation and capital loss will also help indian ecconomy a lot if it can pull this off!
A currency's strength is determined mainly by the country's balance of trade. Hope ‘Make-in-India’ finally gets going and does not remain a slogan, a ‘mann ki baat’
Current policies of maintaining a stable Dollar - INR rates have kept the inflation in check. All our neighboring countries economies have been hit by massive inflation and devaluation of their respective currencies. They clearly lack resources for keeping their currencies stable against dollar. Also I was hoping for some answers / pros n cons by the end of the discussion. Frankly this debate pre-dates the articles you are referring to.
FII outflow happens when world starts buying more dollars, to safeguard their money. This happens when:- a) US Fed raises interest rates. b) there is global recession fears c) war like situation in the world. a) is not true anymore as Fed has cut rates. But b) and c) are quite true.
What an explanation!! I studied finance and economics in university but never thought of these concepts the way you explained especially about subsidising imports by keeping the Rupee high Thanks and love from Sydney 🇦🇺
Exclusive content, privileges & more - Subscribe to ThePrint for special benefits: theprint.in/subscribe/
th-cam.com/video/Ynpjtd0cNXE/w-d-xo.html
Gems of Modi 1
th-cam.com/video/_q5PPlmA9lg/w-d-xo.html
Gems of Modi 2
Still there is sadly a lot of corruption and mafia gangs involved in the Indian bureaucracy and the economy.
It is so tough for the small business owner.
Again a half truth ! A hallmark of Mr Gupta !
Exactly , posing hideously as showing both views but showing strong bias for one side is the what i feel while listening to Shekhar Gupta . He is saying that India should let the rupee fall freely without making sense of geopolitical consideration going around in the world . America can freely print all the paper money called dollar and buy NATURAL RESOURSES of the world . Its just backed by US hegemony and if it is threatened people might loose trust in it and it will devaluate . Better to Buy Gold from that dollar right now , slowly , overtly and covertly .
@@GautamMahara-k1q reserve banks around the world generally have a mix of both precious metals and foreign currency because gold is a hedge against inflation, but currency is the definition of liquid which helps in maintaing day to day operations in currency exchange to ensure smooth payments for importer/exporters
the US dollar can really only be replaced by another currency whatever it may be not by gold
The RBI spent from its reserves to shore up the rupee to cushion it during the earlier phase of Russia Ukraine war. India lost some foreign reserves then. This is known to everyone and the RBI governor himself had come on TV and said the same. Were these economists sleeping under a rock on Mars then? But the things have turned around pretty quickly and the fact that the reserves have increased quiet rapidly since then shows that RBI is doing the right thing. The price control that the central government carries out is an essential component of controlling inflation and this happens everywhere in the world including in the US. This government should get credit for having inflation under check compared to the earlier regime where even a small incidence abroad was used to rip the Indian citizens of hard earned savings by artificially devaluing rupee and increasing inflation. Who can forget the times between 2011 and 2013? I am surprised though that these journalists do not have any wisdom to share when US Federal Reserve is brazenly managing dollar's value while at the same time its printing money left right and center, but had Indian policy decisions compared to failed economies of Zimbabwe, Afghanistan, etc! This hit piece is for those corrupt opposition politicians and their pet journos who have cash abroad and want the most buck in rupee terms than for the common good of Indian citizens. Those days are long gone
Some people need to pull their head out of the 56 inch tongue's ass and stop ascribing ulterior motives to any journalist who criticises the tongue's governance.
Shekhar has given well reasoned, well researched arguments here. Maybe he is right, maybe he is wrong. But there is no reason to be butthurt.
The 56 inch tongue and its chamchas aren't the only patriots in the country.
@@HarmanHundal01 First of all you need to read clearly and comprehend accordingly and before that, go through the video again. Shekhar explains with great pain that its not his research. Then why are you attributing it to him? Shekhar himself admits that all economics is politics, so why can't it be this research that he quotes from? Every propaganda is backed by research and statistics with cherry picked data. Why are you getting offended personally? It's not going to grow your 2 inches any longer
@ You respond with yet more daftness. I was commenting about the mind numbingly stupid tenor of your comment. For 56 inch tongue’s chamchas like you every critic is a conspirator against Bharat Mata. That is an assholish perspective, sorry to say. Stop wasting your life in this chamchagiri and start putting your points across more politely instead of frothing at the mouth in agony everytime someone finds something wrong with the 56 inch tongue’s policies.
@@sameerthekingcobraGupta himself is not sure if currency manipulation is happening or not. He is basing this opinion on some commentators columns that Inr is unduly supported by RBI. What is the proof? And Mr Gupta himself agrees the street value of dollar has not increased in india. If INRs value was really heightened by currency manipulation it would have been certainly reflected in the its street price
Under the great economist in UPA, inflation rate was always higher than GDP rate
The argument is flawed. As long as the RBI is trying to set the price through market trades (buy/sell USD) then supply will meet demand. Hence there is no black market created. If the price is set by diktat, then a black market is created.
point is wherther its RBI or market makers if big forces plays with the currency trade for a long period of time it will create imbalance. simply saying its done via market trades so that why okay is not correct IMHO
RBI "trying to set the price" is the issue here, supply-demand is something that markets take care of and no entity is smart enough to somehow setup a system where they can dynamically match supply and demand
point is rbi SHOULD NOT be setting the price. of course it has to go by market trades (what other way is there for such an open economy?) but artificially keeping the value of currency low or high catches up to u since it does not match the macro fundamentals.
RBI does not sets the price, but trues to reduce volatility .. aka reduce risk premium
@@MrKguha not saying it's ok or it's not-ok. Just saying black market will not be created
We can not go back to the Nehru Gandhi era of Mai baap sarkar.
Now it’s Modani sarkar
Tell that to Modi.
Jay Shah, the current honorary secretary of the BCCI, has been unanimously elected as the Independent Chair of the ICC, starting December 1, 2024.
Failure of Modi
Socialism is so deep from general politics from Nehru Gandhi family that we as nation don’t even know what’s good for us. Ex agricultural reforms. Gupta ji agrees.
Exports have been hit due to Covid, Ukraine war, economic downturn in Europe and China etc but find no mention in this analysis- wonder why?
A very simple question - all this while rupee falling was a problem, now rupee not falling is the problem! What am I missing here?
He explained it so well and if you still didn't understand, you may be missing a "brain" here😅
@@polstarnavigator Does Gupta uncle has one?
What about stability of the currency in order to be a global currency. Any thoughts Mr. Economist@@polstarnavigator?
Extreme one sided view . If rupee depreciated at faster rate then IT & pharma exports will be high . So will be the inflation & low FDI as the currency is no longer stable to do FDI & FII higher investments.
Controlling inflation is the key to seeing a stable rupee. Our key import causing most deficit are - crude oil, natural gas, pulses and edible oil. Renewables policy, and National Pulse and Oilseeds Mission is already working towards reducing these imports.
Regarding exports, our exporters should focus on competitiveness. Some of the blame should be put on states, that cross-subsidize energy costs to give freebies. And also, wastage in farm subsidy needs to be controlled.
RBI may be pegging the dollar to limit inflation which is a major KPI for RBI. Cheaper rupee will make oil cheaper and which will keep inflation in check.
Why should everything be seen from the prism of politics or nationalism?
This is rather one-sided. Maybe Mr. Gupta should at least quote what our excellent RBI Governor Shaktikanta Das has said on this matter: “Rupee is a freely floating currency and its exchange rate is market-determined, RBI doesn’t have any fixed exchange rate in mind. The RBI intervenes to curb excess volatility and anchoring expectations," - It seems he is very clear, and doing a great job - increasing our reserves by about 100 billion or so in the last year and a half, while reducing unnecessary volatility caused by temporary, speculative flows.
This is Mr Gupta not owns story. The story is ordered by someone else..
@@ashutoshpandeyz4508 It's sad to say that you are probably right. This is hardly surprising news - as Shaktikanta Das says : "After all, this is the very purpose for which we had accumulated reserves when the capital inflows were strong. And, may I add, you buy an umbrella to use it when it rains!,". Why not present this side of the story - which is quite simple and commonsensical?
@@SamirSeth That's not what he said, money being freely floated is comparative to the previous regime of license-raj, however as was apparent from the sources that were shown in this piece the govt is trying to meddle in the exchange rate more as it used to do few years ago.
@@devilsmirk5826 What Mr. Gupta is doing is conflating managing volatility and keeping rupee high. The RBI governor is very clear that he is only ensuring volatility (caused by speculative / temporary inflows or outflows) is kept low. This is not "meddling" - this is one of the reasons we have accumulated reserves in the first place.
@@SamirSeth The line b/w what meddling and "ensuring volatility" seems to be quiet thin in your case, if artificially keeping currency high for a 5 year period is not meddling then what is?
I will rather believe in RBI than all and sundry economists like Arvind Subramanian RBI governor knows what is good for the country
Exactly lol. He in fact lost me the moment he mentioned Subramanian haha.
Mr. Gupta, perhaps you should have spoken to your staff economist before posting this video. The primary factor that determines exchange rates is relative inflation rates between the 2 markets you want to compare. In this case the US and India. Prior to the inflation targeting regime, average rate of inflation used to average between 8 to 12 percent. Over the last 11 years it has ranged form 2 to 6 percent, and on rare occasions breached those barriers both ways, i.e. going below 2 for a while and also a little above 6 for a while. At any rate the US has managed to keep their inflation rate at 2 percent historically. So instead of having a relative inflation gap of 6 to 10 percent before 2014, we have been able to stabilize the gap to 2 to 4 percent. The decline in average inflation rate has mostly been market driven, with better fiscal management and the formalization of the economy. When you have nearly 200 million Indians participating in the stock market, that will have put an upward pressure on the exchange rate, as even if FIIs sell the significantly larger number of domestic investors in the market can minimize any drastic negative impact the selling off by FIIs have on the Indian financial system. The one last thing I would like to point out is we are now doing all our trade with Russia in Rupees and Rubles. So any dollars we might have needed to buy oil or any thing else from the Russians previously is no longer required. Therefore RBI does have the luxury of selling dollars it does not need to buy oil from Russia that it would have previously have needed in reserves, Further we are buying oil from Russia at a discounted rate and selling it to many countries especially in Europe at a markup as that is what a good business man would do when such a chance for arbitrage exists. This is purely market driven and not a sign of a mai bap Sarkar. The recent stability of the Rupee has more to do with the new conditions prevailing in the global markets than any unnecessary intervention on the RBIs part. Ant if anyone thinks Russia will not sell us any more oil in Rupees because they can not use it, that has been proven wrong. We have been trading with Russia without using the dollar for over two years now. If the Russians could not sell us the oil for any thing of real value in exchange for the oil supplies, they would have halted exports a long time ago. Despite what Brown Sahibs educated in Ivey league schools think, and regurgitate as if they are a priest of some God's temple, perhaps you might want to talk to people who are capable of independent thinking, before producing such videos. The world is changing.
1. Selling dollars and buying gold (most EM CBs are not just on buying spree but also bringing it home) is a winning strategy when the dollar is overinflated compared with all major currencies.
2. Poor fiscal management in US is pushing their yields up, the yield differential on a 10 yr bond with India has reduced to a historic low of 2.5 percent. If it was not a sharp spike from 75 to 83 in 2022 due to ukraine war, the currency would have been 80ish per the inflation differential logic.
3. Listen to Russel Napier if you will, you will get the idea how china’s manipulation of its currency was instrumental in driving consumption growth in US, with the RMB moving very little for 2 decades despite the exports surging multifolds. With interest rate parities and other theories of economics, chinese RMB was worth more vs USD, if not less.
The onion analogy for currency was naive - at many levels; perhaps, borderline childish.
I think: though journalists, as individuals, ought to have the right to personal opinion, they shouldn't be allowed to express such opinions via journalistic means.
Can you present why it's childish?
@devilsmirk5826 let's ask TCA Sharad Raghavan & Radhika Pandey - upon their return. :)
A couple of economist think they are better than the people on the job.. 🗑 report..
Hey SG, loved the episode, but I think the arguments need a bit more nuance. I'm purchasing a "Super Thanks" so that my comment catches your attention and you pin or like it for other viewers.
While I am in favor of depreciating the rupee, the current trend of stable prices is not because of "currency nationalism." Here are a few points from my side:
1. In 2016, the Modi government introduced an inflation-targeting mechanism and set up the RBI's Monetary Policy Committee, which was mandated to keep inflation around 4%. It has been mostly successful in this regard. As a result, the divergence between inflation in the US and India has decreased, contributing to the stabilization of the exchange rate.
2. Although India's export growth has slowed, the last few years have seen subdued global demand. However, India’s services exports have grown substantially during this period. Beyond IT services, there is growing optimism in higher-end services, thanks to Global Capability Centers (GCCs) that are setting up in India. And remember India's exports are primarily in services sector.
3. India's oil intensity by GDP has reduced significantly in the last 10 years (by more than 60%). This reduction has also contributed to exchange rate stability.
So, while it may seem that the RBI is controlling exchange rates, these structural changes in India over the past few years are worth considering.
But RBI does inject dollars in the market. While I agree with your points these points don't explain RBI intervention.
Assuming your points are true then RBI shouldn't intervene as rupee will correct itself automatically but that isn't happening.
@@DataCrusade1999 As somebody said in a comment, the RBI spent from its reserves to shore up the rupee to cushion it during the earlier phase of Russia Ukraine war. India lost some foreign reserves then. This is known to everyone and the RBI governor himself had come on TV and said the same. Those were extraordinary times and we were just getting out of Covid shock. Things have turned around pretty quickly since then and the fact that the reserves have increased quiet rapidly shows that RBI isn't doing anything wrong. As far as intervening is concerned, it's done as per a well defined mechanism set up by the RBI. Every country does that, the worst being the Federal Reserve 🙄. It's perfectly nomal
@@VikasAlva I'm sure RBI has a mandate, but let the market decide the rate. RBI Governor took umbrage when IMF said that rupee isn't free but artificial.
Sudden up and down movement is what RBI should be concerned about not keeping rupee at 84.
I would add that fiscal deficit has been largely significantly lower. When your fiscal deficit comes down the forex rate goes stronger. This is basic macro economics. Also inflation under control is also a result to some extent of the fiscal deficit being under control. If we move to a fiscal surplus position - that is what happened in the Vajpayee regime - the rupee will go super strong or tend towards it. If I remember right we saw a visible strenghthening of the rupee during that period of Vajpayee regime. We also saw a trade surplus and the forex reserves crossing the 100 billion dollar mark at that time. So the arguments being given by Mr.Gupta are based on micro factors of forex trading whereas the macro economic factors all suggest that rupee depreciation is behind us to a large extent. In fact why do we need 700 billion dollars in forex reserves? We can invest a good portion of that money in the Indian economy instead of giving it out at abysmal rates of return to fund the dollar economy. So there are a lot of factors that are not come out. This article is not cutting the clutter in any way
@@DataCrusade1999 I don't know what are you talking about. I have never seen rupee stuck in at 84. Rupee is at 84 now, it wasn't so just a month ago. I dont think RBI has any intention to keep rupee at any particular level, it just wants it to be stable. This is evident from the Governor's commentaries and interviews. It has slipped in its value steadily in the last two years
My understanding was rbi was buying the dollar to keep rupee from appreciating
Shaktikant Das rebuked IMF when they said in a report that Indian currency is not free but artificial.
Now here we are.
So many loopholes and oversight in this piece!
1. Inflation has been curtailed in Modi's second term (Modi doesn't deserve all the credit there, barring some like buying oil from Russia).
2.Currency valuation depends a lot on country's economic activities, exports and imports. We still have higher imports compared to export.
3. Modi govt has been punching above their weights in international standing for India - much more successfully, and at that table the countries with more stable currencies have a better say on matters.
4. If India wants other countries to do trade in our currency, our currency must have stability which attracts them to save in our currency.
5. Weak currency doesn't always mean higher exports. If so Zibambwe, Argentina, Venezuela etc would have been export powerhouse of the world!
All above points and many more that I couldn't think on my feet have been missing in this piece!
But we just took 60% of gold reserves from the bank of england
@@Asura_clanThat gold is owned by India only. Just that location was changed. These days, you never know, if West can confiscate our reserves, like they did with Russia's dollars.
@rajx7120 yeah
@umang your points sound nice but aren't supported by economics. As a MSME manufacturer, imports are cheaper than what we produce. We are subsidizing the imports, rolling carpet to them so that we die of starvation.
Before you accuse me of illiterate, I have MBA in finance from very reputed college. ✌️
@@abhiwins123 you lost me at subsidising imports!!!
You force non-economists to watch your video twice / thrice, Shekhar! Excellent information as always! It definitely brings in a new perspective to the age old misconception about a stronger currency being better than a weaker one.
Awesome episode!
Just stop intervening unless it's really necessary!!
I’m favoured financially with Bitcoin ETFs,.$90,700 biweekly profit regardless of how bad it gets on the economy..
Huge! Been trying to trade on my own for a while now, but it isn’t going well. few weeks ago I lost about $70,000 in the trade. Can you please at least advise me on what to do?
Well, It's all thanks to Robert Marion
Robert platform maintains a unique perspective and is very transparent with their investors. Regardless of whether or not he outperforms. I will forever stay invested!
Spot-on, I would always rate his signals as one of the best ever used 100% accurate.
I’m not here to converse for him to testify just for what I’m sure of,he’s trustworthy and best option ever seen.
India still imports a lot of oil....so a big rupee depreciation may not be good
Great analysis Guptaji
The Same argument has occurred in the USA. While it remains the largest precision manufacturer in the world, the lower cost manufacturing was not lost.
Since WW2 the USA had no industrial policy until 2017. Both administrations have continued the policy. National interest had been neglected for short-term profits. Less so in Europe and Japan.
dollar Rupee exhange rate : How it affects a common man ?
This is happened to me
I bought external hard drive for 8,500 Rupees in 2021 . Yesterday in 2024 I bought same HD for 10,400
A GOOD REPORT... Thanks
An excellent choice of CTC today. It’s something that should be more in news and there should be more opinions in print and video media.
SG sounded careful in expressing opinion but nevertheless the concern was evident. I believe, that’s, as SG mentioned, because the economic editor is away.
Exports coming down by 50% is a huge concern. We should be looking at experts on suggestions on how to raise the exports and at govt on the steps being taken to shore up the exports. I hope there is a review of progress on this on CTC after a quarter. This CTC should be viewed as sounding the bugle on this slippage of exports.
Shekhar ji , sorry to say but two very important data points you’ve missed out on :
1. The currency depreciation of any developing economy has to be seen in comparison to the currency performance of other similar size emerging economies .
2. It is perhaps not correct to assume that export performance is hindered by a non depreciating rupee only - being an exporter I can tell you that there are a whole plethora of reasons for low export performance from india - some of them being - large economies like Europe doing poorly , global trade uncertainties due to conflicts , high import duties in india for key raw materials , export incentives being reduced by Modi govt in india as an act of fiscal prudence .
3. Another big reason for low exports is also the high domestic demand in india presently where a lot of producers just don’t have the time to focus on exports .
Rise in export competitiveness with depriciating currency is a simplistic economic argument, this holds in theory but not in practice for india bcz india does little value addition to imported stuff and exports it like api to medicine, engineering goods and refinary products. If import is costly then export becomes costly. This being said allowing currency to depreciate in an orderly fashion is logical but saying it has such a huge impact on export competitiveness will be an overstatement
Currency nationalism has not worked according to Guptajee: what about China?
Another way of looking at it is this: Have the foreign exchange reserves increased or decreased from 2022. They have increased.
It is more complex than that. One point I would like to make is that, post the pandemic, when the developed world was hit by inflation, India had a sedate inflation regime.
There are complex elements at play. I doubt even the central bank or the economists really understand them.
Interest rate and inflation rate differentials.
Terms of trade - Is what is produced in India more valuable than it was a year ago. This is relative. If the Indian goods and services bundle gains by 2%, and another country one's gains by 3%, then the rupee should depreciate by 1% wrt to that country's currency.
Capital inflows and outflows.
Expectations and speculation.
...
Very good analysis Sir!
If Exports have come down to 50 percent , How the Forex Reserves have gone upto Reasonable/ Satisfactory levels ; Is it by magic (or ) Is there any logic ; What the Finance Minister / RBI Governor has to say on this !!!!!! Media talks are OK and informative ( mostly highly opinionated) as they do not have to walk the talk !!!!!
We should let the market decide what it should be.
That's the way we can easily avoid middle income trap and keep consumption high.
Before anything, I want to make something very clear. I used to sell a bag for ₹8500 in 2020. That was $115, now it’s $95 give or take. You know what’s not gone down? International shipping rates. Barely anyone is India is buying at these prices in India, to ship to UK, my total cost ₹12,0000 total. In 2023, I have to change my price everyday to justify why I suddenly need to change ₹18,000 while incurring lower profit for the same bag and feel like my work isn’t worth anything. Shipping cost is worth more than product, bye bye business.
Secondly, I’d like to point out that this is a Completely flawed ideology. Competitiveness of economy should be based on development of value added products and cannot be compared to essential commodities. Onions and pencils, both are basic and essential products. It is essential to keep these commodities at a fixed rate to ensure stability. This idea of letting pencils and onions fluctuate is going to collapse the value added section of the economy. Market economies work very different from how you’ve explained, governments play a large role even in the west to balance the currency value. On the other hand, If the free market should flow based on your ideology, why artificially horde the dollar rather than letting the market take charge? What was the point of having foreign exchange reserve if not to balance the rupee value?
On the last point, artificially subsidising import goes against the idea of self sustainability thay India prides itself. Also this subsidy only benefits large corporations and businesses and devastates locally owned business and high value export products. It’s a travesty to see such a complex topic be so badly analysed and explained.
Much needed information.
India’s best bet is to deal and buy crude oil in non dollar currency. Except for oil other commodities can be bought in dollar and US can to convinced to see this as an exception
One of the most developed economy south korea has even worse dollar won ratio than rupee as long as u have strong macroeconomic fundamentals, this debate over rupee-dollar is futile, rbi now has close 700 billion dollars foreign reserve any heavy fluctuations will be easily handled by them,
the growing trade deficit with South Korea, which stood at about $9.5 billion in 2021-22,
We are giving back dollars to USA which is printing it rekalessly . Why hold a currency which you know has no actual strength ?
Rupee depreciation is being promoted probably to sell more and more Indian assets and resources to US oligarchs who can print money at will.
I am buying his argument totally
Well explained, Prof Gupta. The oil import subsidy concept in particular should reach the powers that be.
These articles are too theoretical. Practically, stable & predictable exchange rates are better for business people. Forex reserve of 700 billion is too much for India.
Does that include adani?
Couple of things Mr Gupta missed here is
1) if the price of Gold rises, then the govt will run into trouble because it created SGB without holding any gold.
2) the weeker currency is net beneficial for a country if the country is in trade surplus. Thats is simply not true if the country is in trade deficit.
3) India is a oil importer country, if rupee depreciates then the higher price of oil will lead to higher inflation which will be a problem.
4) Holding an ever increasing amount of dollar reserves is not not great compared to holding an ever increasing amount of gold which RBI is currently doing, because the value of dollar depreciates where as gold appreciates.
Buddy why do you say that GOI holds no gold against SGBs. At last count the GOI has reserves of 840 tonnes which are more than 5x of all the SGBs issued.
@@gauravtamhane Thats because that 840 tonnes of gold isnt against SGB. That is national gold of the country and belongs to every citizen of that county. THAT GOLD WILL NOT BE USED TO GIVE THE MONEY BACK AGAINST SGB. If push comes to shove, the govt will rather print the money. ALSO GOI cant use that gold to settle SGB because there are legal hurdles as well.
Not an expert but I think the pencil analogy is bad. If government fixed pencil price artificially then that would be like doing it out of thin air unlike central bank selling dollars to satiate the dollar demand.
Key factor in India's foreign trade is going to be reduction of our imports from PRC with the slogan of Atma-nirbharata (self sufficiency). The stable & long term strategy lies in copious production of Si metal & ICs called "chips" (at least the low-end chips the advanced producers have moved away from, but have a huge demand in India & otherwise). If India sets her mind in it, she can become a huge manufacturing hub, in global supply chain.
Is government artificially keeping rupee stable so as to keep big traders happy on cost of MSME development?
If rupee gets weaker(street price)i.e 90-95rs to dollar, our MSME can double or triple the exports as we become competitive.
No wonder modi is surrounded by importers at dinners and MSME is for only photo covers
It’s good to declutter but you try and declutter so much that it all becomes a mess and I lose the track as to what are trying to say.
If that is the case … US would have never used its strategic oil reserves to manipulate crude prices …
Countries are sensitive to some commodities.. so we cant use the same brush
Strong or weak doesn't matter as long as it is stable.
It is with the assumption that Dollar is going to be strong currency for ever. We need to move out of Dollar slowly. World leaders are now planning to bring down its dominance. Then you may have to rewrite your analysis.
SG is too cautious, this one needed an expert as well. This is a very important topic.
we should focus on improving the quality of our exports and building resilient customer bases, more than worrying about making our exports being "more expensive" and losing their competitiveness. The better our products the more they will withstand an appreciation of the ruppee. Yes this can be debated back and forth, but this is just my opinion ::)
Has anyone seen the movie 'Shakti' starring Nana Patekar? Karishma kapoor gives SRK US dollars & said $1 = 48 INR. SRK in the climax kept on repeating 48, 48. And today USD 1 is......... Well
Very bad analysis. As per your argument, China which pegged it's exchange rate to the Dollar for the last 2 decades was foolish? There are trade offs in each scenario and the Indian Government economic leadership decides to what's in the best long term interest of India, according to the continuously evolving macro conditions and Geo politics.
Let the ruppe be flexible and remove import duties in crude oil and gold
Piyush goyal was saying that rupee is going to appreciate in future
How is that possible?!
I remember the headlines when Bharat's USD reserves were just shy of $600B. There were breathless headlines from the gyani every time they dropped by $1B. I now suspect there was some wider coordination behind the headlines.
So RBI is keeping ruppee strong while at the same time growing its forex kitty. Maybe these economist need to get their head checked.
Strong rupee? What? Rupee was at 75 to a dollar just 3-4 years ago. Now it nearing 85 to a dollar. I don't think that counts as stronger rupee.
And what exactly is India producing that is being exporting in large quantities and which other countries are not able to buy because of this so-called strong rupee? And isn't it contradictory that if the rupee weakens further then the forex will go down not up?
It seems like we are in the same era as Russia was in 1990s during which the Western puppet Yeltsin weakened the rouble and Russian assets were sold to Western oligarchs. Thankfully for Russia they had Putin after that horrible saga ended. Will we find our Putin?
Always have this argument of opposing the currency manipulation but in 2014 rate was 60 ..but now it is in 80s...but what about exports growth
So don't give a blunt argument in favour to it over export competition
Thanks!
Dear Arko,
Thank you for supporting our journalism!
It’s so frustrating to see that even in 2024, we’ve still not learnt the lessons from the licence quota Raj, or better yet we refuse to learn those lessons.
The movement of our currency on a bad day is something to see. The next day after that, you'll get a better understanding of the policy than any economic article can give you. If the rupee starts the day by depreciating a lot, it usually goes back up to a higher level by the end of the day. But the next day it covers the gap. The RBI is trying to make the rupee weaker against developing countries and stronger against developed countries, which actually hurts both imports and exports.
All these economists are feeling sour in their mouth. History graduate had shown them their place.
The Rupee is tied to the US dollar. The US dollar is too high so, the Indian Rupee is too high. Compared to other currencies, It is doing just fine.
Shekhar ji, pollution level came down significantly because of investment in Sheeshmahal
Thank u sir
Happy Deepawali Professor
Currency speculators getting pinched hard.. flexible or speculative
This is a joke of an article. The market value of the rupee would be higher if it’s allowed to float. The economist at the helm of ThePrint seem to only look at trade forgetting capital import and remittances.
Our government should not even control crude oil
How convenient to remember 4 years of Bajpai govt and jump to 12 years of modi govt saying , they had 400 billions of reserves, this intelligent guy scapes the entire 10 years of Manmohan singh government . Best of godies
Sound is too low .. check other sites and podcasts.. compared to them it's low
I disagree with Subramaniam's view. As you have observed yourself- the exchange rate with the dollar is a matter of fierce debate between economists. The RBI's job is to act as a shock absorber between the consumer and the market and to stabilize the rupee -dollar rate as far as possible; slow down an abrupt rate of change which delivers more of a shock than the same change compounded over time. And to say-" oh RBI lost x billions" is disingenuous because they make no comment when RBI saves the same amount at another time. And to adopt the US disapproval of "interfering with the market" is wrong. They evangelize for US benefit. The market can deal massive blows. This is a job for the RBI and the Finance Ministry- not sundry economists.
I think the author is one sided without understanding grass level
The amount of borrowing & money printing done by the US is insane. Any other nation that does it, will find their currency worthless, inflation at 1 million % & the economy collapsing. The way the US escapes this fate is by controlling the Fx price discovery mechanism
If imports exceed exports, then it seems to me having a weak currency hurts you, and vice versa. It is also true that if your currency strengthens, exports suffer, so the moral of the story is clear to my simple minded brain. For a strong kick-butt economy, reduce your imports relative to your exports. This is what China has done, and now they are kicking butt. Import substitution is the key, and this does not happen overnight. China started with cheap plastic toys and chairs and tables and moved up to electric fans and refrigerators, then to solar panels and batteries, and are now making electric cars. This is not just a matter of currency manipulation -- they are actually making stuff, and pretty good stuff at that.
@22:08Crux of this episode is "All Economics is Politics"
No wonder so subramnium and josh felman disguised their political will as economic hypothesis .
Tourism in India has a tremendous potential to earn foreign currency besides export of goods and services. Only if the law and order situation in our country was not getting from bad to worse. Single women around the world have increased solo traveling. How many women around the world would be comfortable traveling solo around India?
SG Sir you should stick to politics and history.
If you try to mix politics and economics then there is more clutter.
How does reducing import tariff's reduce forex outflow? Instead lower prices will further increase imports resulting increased forex outflow putting further pressure on the rate of the rupee.
There are far more topics up your street that you should address.
One case I can see lower import tariffs decreasing forex outflow is if the imports in question are goods needed in the supply chain for the manufacturing of a value added final product (kind of like how we import crude oil and export petroleum derived products).
Was the Ans in your explanation? Strong currency means subsidized imports. What is India looking to Import? Defense equipment. India is expecting and preparing for upcoming war.
9:43 keeping too much dollars is risky.
They can take all of it away at any time.
India should make Re fully convertible. This artificial pegging does not work in this day and age.
Well articulation. I guess Erdogan also followed similar and now Turkey is in big trouble
The portion on effect on imports is not at all convincing.
Are we to understand that India the experts in Government etc. do not know what they are doing?
Weaker Rupee as compared to USD is a lifeline for NRIs. Whose entire existence is dependent upon this high Exchange Rate between USD & INR.
Which makes a half decent salary of 70,000 USD per annum in USA to 6 million INR in India.
Not true. NRIs who remitted money in 2014 and earned interest on those deposits,have lost all the gains because inr has depreciated by more than 38% in last 8 years
What is the point of reading some report and telling a story without bringing any counter point or doing any research?
One sided and biased view . India avoids western pressure by balancing exports + remittances with imports. Economy with such a political bias is very clear .
There is no free floating currency, by changing interest rates the federal reserve essentially affects the availability of dollars not just at local market levels but at global levels.
Sir the argument you are making was built in response to East Asian financial crisis. The targeted countries pegged their currency and their financial system let in big flow of short term debt as they had no capital control. The crisis was planned well to exploit this weekenss, when Wall Street triggered their exit of short term debts and hedge funds started selling targeted currencies, currancies had to be devalued as US blocked other countries to lend USD and wanted IMF to interfere in order to impose Washington consensus which would be in their benifit.
Wall street and US was the sole superpower then and it was no use negotiating or fighting them, so in order to prevent it countries started building larger reserves and putting capital control on short term debts. Also the other reason was to build savings for imports.
The conditions are different now, both US and Wall Street are not sole superpowers, while US is volnerable due to its high debt and weekening millitery and Wall Street is in old system driven by greed that would self canabilise itself if it stretches too much. There are many other countries with sufficient USD reserve to lend now as seen with crisis in Srilanka and Pakistan which was not possible earlier and India has capital control and strong domestic financial system to counter sudden rugpull.
India might be joining other countries to lower its USD reserve as it can use the opportunity to push its own currency system for international patment.
The savings it can get from holding billions USD bonds at 2-3% rates leading to loss of over 4-5% annually due to inflation and capital loss will also help indian ecconomy a lot if it can pull this off!
A currency's strength is determined mainly by the country's balance of trade.
Hope ‘Make-in-India’ finally gets going and does not remain a slogan, a ‘mann ki baat’
In this one Couptaji shows that he has no friggin clue.
Current policies of maintaining a stable Dollar - INR rates have kept the inflation in check.
All our neighboring countries economies have been hit by massive inflation and devaluation of their respective currencies. They clearly lack resources for keeping their currencies stable against dollar.
Also I was hoping for some answers / pros n cons by the end of the discussion.
Frankly this debate pre-dates the articles you are referring to.
Is FII’s outflow because SIBI’s credibility has been undermined?
FII outflow happens when world starts buying more dollars, to safeguard their money. This happens when:-
a) US Fed raises interest rates.
b) there is global recession fears
c) war like situation in the world.
a) is not true anymore as Fed has cut rates. But b) and c) are quite true.
What an explanation!!
I studied finance and economics in university but never thought of these concepts the way you explained especially about subsidising imports by keeping the Rupee high
Thanks and love from Sydney 🇦🇺