Is Dollar Responsible for Rupee’s Weakness?

The amazing Indian finance minister Nirmala Sitharaman is trying very hard to somehow defend the abysmal economic performance of her government. As I have mentioned in my past writings, the Indian rupee will continue to slide because of the crazy money printing sprees by the Indian central bank RBI, and RBI is forced to print this money to fund the ever growing expenditures of the Indian government. The supply of rupee is far outpacing its demand in the national and international market so its value – purchasing power – is collapsing. Instead of telling this truth to the public, the Indian finance minister is shamelessly trying to misguide the voting public. She, though I am sure it’s from her illiterate advisors, has given a new spin to the problem of rapidly devaluing rupee. In USA she recently said that, 

First of all I will not look at it as rupee sliding, but dollar strengthening. 

Sitharaman is completely wrong. As I said above, the weakness of rupee has nothing to do with the strengthening of the dollar. Just like her I can also say, and in a much more economically sounder sense, that it is not that the dollar is strengthening but the rupee is sliding! Rupee will stop sliding the day RBI will stop printing it. I challenge Nirmala Sitharaman to order her RBI governor to stop printing any new rupees for a year and then see how rupee starts to recover. She can also announce that her government is now going to back Indian rupee with its vast – private and public – gold reserves. Just these two policy actions will start strengthening rupee right away. Freeing up the economy of her government’s onerous burdens will further strengthen it. Is she going to do these? Nope. Because fooling people is easier for politicians than doing the right thing even if that lowers their political power. 

We need to know here that if the dollar is strengthening then why it is strengthening? Whatever is happening with the Dollar is happening because of the actions of the US government and its central bank the Fed. American government and central bank are responsible for whatever happens to the value of dollar and similarly Indian government and its central bank RBI are responsible for whatever happens to rupee. Thus this is independent of the actions of US government and its central bank the Fed. No one is stopping Modi government from taking firm actions to strengthen the Indian rupee. They have a thumping majority in India and they face no political roadblocks. Continue to blame others isn’t going to help them or this country in the end. 

Blaming US dollar for Indian rupee’s weakness is not only a cowardly shameless act of the Indian finance minister but a worst kind of mindless propaganda. Such foolish propaganda can only fool Indian voters from the Hindi heartland and other BJP stronghold states, but it won’t help Indian rupee recover from its depths of darkness. In fact, the actions of Modi government and RBI only means rupee will continue to slide and become so useless one day that people will outright reject it in their day to day transactions.