Indian Rupee Slained – An Investigation

 [Dear Readers,  I publish here a little different stuff than my usual. Definitely, I will continue other stories which I have not completed so far. But, as of now, I present this. Hope you enjoy. I would love to have a discussion too over this article. Happy reading !]

In 2006, when I was in United states for my summer internship, every day I would wish, ‘May the exchange rate (rupees per dollar) increase!’ Of course, I was earning in dollars, therefore like a self centred moron, I wanted to get more rupees after coming back to India. That time I never cared about Indian economy and exchange rate never increased, now I care, so exchange rate never stops increasing.

If I just take a look at the rupees' performance against dollar starting from the year when I was in US i.e. 2006, statistics tells that it started from 45 INR / USD in 2006, kept going down to 39 INR/USD in 2008 and then picked it up from here to reach 50 INR/USD in 2009. Though it further started declining in 2010 and returned back to 45 INR/USD in early 2011 thus relieving Indian economists a bit but pretty soon it again started building up since then and as we know rupee reached its all time low, 56.40 INR/USD in recent days. This means now we have to spend 56.40 INR to buy one dollar while it was 45 INR to buy one dollar in 2006. Clearly, rupee has lost its value against the dollar or in other words, rupee has depreciated.

So, why did Indian currency depreciate against dollar? This was my first question to myself. I began my investigation. The very basic principle of economics operates here too which says ‘If the demand of something is higher than supply its value appreciates and vice versa’. So, if the demand of a particular currency decreases, its value depreciates. 

Now my objective was narrowed down to figure out the factors causing increase in demand of dollars vis-a-vis factors causing decrease in demand of Indian rupee.

So, here I present the major culprits:

•  Affection for Dollar – The first thing I discovered was that the dollar is the most accepted currency. Why is that? Derivative instruments are available in plenty to hedge the dollar exchange rates hence it is considered to be the best currency to do business. Most of the people consider dollar as the safest currency and this sentiment reflects the exceptional liquidity of markets in dollars. Hence, any negative movement in the market lead people to accumulate dollars. Due to the crisis in Europe, large banks and financial institutions started selling euro and bought dollars thus making dollar stronger against other currencies. Amidst the uncertainty in global market, demand of dollar has gone up. If we go little more deep, we’ll find out that the extraordinary stability in US treasury securities has developed a faith in dollar to a certain extent.

It may interest you to know that Warren Buffet too likes dollar than most of the other currencies.

•  Current Account Deficit in India - When the total import of a country exceeds its exports, the phenomenon is termed as current account deficit and the country is like a debtor to rest of the world. India is in a state of current account deficit. Now when the import of the country is higher then to maintain the equilibrium, the currency of the country has to depreciate.

If export is more then the buyers will demand for more Indian Rupee to purchase these export goods leading to appreciation of Indian rupee but current situation is just reverse.

• Economic Slowdown – When a foreign investor invests in India, he has to purchase Indian rupee to make investment in a particular market segment which again leads to higher demand for rupee and hence its appreciation. FIIs (Foreign Institutional Investors) have made considerable investment in Indian stock markets. But currently, influential world (mainly Europe) is facing recession, so they are pulling their investments out from India which again causes Indian currency depreciation.

It further leads to a vicious circle. If currency depreciates, FIIs may end up making losses in the stock market and hence it will act as a deterrent for FIIs to invest more in Indian market which in turn will cause further rupee depreciation.

           

• Indian Policy – Economic policy of India also plays an important role. Policy should encourage more FDI (Foreign Direct Investment) which is not the case in India. Though government apparently tried to do something and announced FDI in retail but had to hold back amidst huge pressure from both opposition and allies.

Apart from these, there are some other reasons too such as corruption, pro-longed inflation, scams, rising oil prices etc., though as a matter of fact, they are interrelated too.

Major Impact

• Rise in fiscal deficit. Fiscal deficit is a situation which arises when government's total expenditures exceed the revenue that it generates. 
• Rupee depreciation will cause all imported products to be more expensive for us.  Oil which is imported has already increased its price. Due to the increase in oil prices, transportation cost of goods will increase and that will be charged from the consumers only.

•  Companies with foreign debt will be heavily impacted as they will have to repay their loans in dollar.

• Travelling and studying overseas will become more expensive.

• It is good news for Indian exporters such as IT sectors as they will earn more.

Truth is stranger than the fiction

[Friends, giving a break to my previous series of blogs, I am presenting this.]

This is an incident which happened just a week ago. My friend Amrish got in such a situation which can really be a great script for a movie.

It all happened just one night before his wedding. 

That night his house was full of guests. Everybody was waiting to witness that moment impatiently. In one corner, aged people could be spotted discussing about the preparations of the wedding. In another corner, some girls were too busy with their girly talks and most of their talks was about the kind of dresses they were planning to put on. A few old ladies were trying to dictate the correct manner of the rituals to the middle aged ladies. And kids, they were totally busy in playing and running around. Happiness was in the air and the atmosphere was fully prepared to greet the new bride.

 Amrish wanted to meet her fiancé Richa that night. Amrish called Richa.

Richa picks up the call.

“Hey, how are you? I want to meet you right now,” said Amrish.

“Like right now. Really. It is 9:00 pm. Are you serious? By the way, what is the matter?” said Richa from the other end.

“Yeah, absolutely. Come, I can’t talk about it on the phone.” Amrish replied.

“Ok. Let me ask my mom and see if she allows me. I’ll call you back,” She said and hung up.

After 15 minutes Richa calls Amrish.

“Fine. I’ll come down. Mom was little worried and asked me to return as soon as possible,” she told Amrish.

“Ok. It won’t take much time. Just come over. Nehru Bridge sharp 11:00 pm. I’ll be there.”Amrish decided the time and place.

“Ok” she agreed and hung up.

11:00 pm. Nehru bridge. The bridge wasn’t so illuminated with dim street lights. Cold breeze could be felt due to the Sabarmati river flowing under the bridge.

Standing over the river Sabarmati, Amrish was eagerly waiting for Richa. Soon, he saw a Ford car with bright light approaching him which stopped by him at the next moment. And then Richa came out of the car.

“Hey Amrish! How are you? Why have you called me here at this point of time?”She asked anxiously.

“I am glad you came. Tomorrow, we are going to get married....” Amrish said and paused in between.

“Yes. And I am so excited about that. But is there any problem?”She asked sensing something.

“Richa, before I say anything, I want you to be calm and listen to me carefully whatever I am gonna say. Ok ?” Amrish said.

“Now you are increasing my heart beats, ok. Tell me what you have in your mind” Richa requested

“Richa, you should know something more about me. I mean to say....” He again paused but this time he had another reason to pause.

Both of them could behold a bunch of 8-10 people coming towards them. These people were actually running. And one person who seemed to belong to that mob, was running much faster that rest of them. Amrish got little terrified and so was Richa. It was 11:00 pm and almost no body was there on the bridge. The mob was coming closer and closer.Amrish assumed that the mob must be full of miscreants who want to harm them.

Sensing the danger, Amrish screamed, “Richa, Let’s get into the car.”

She understood and rushed inside.

The mob was coming closer. Amrish took the driving seat and put the key in the hole and ignited the engine..

That one person, who was running faster than others had something in his hand, came very close to the car. So close that the gap between him and car’s headlight was less than 5 meters. Rest of them were behind him.

Sensing the danger, Amrish put his car in the reverse gear, pressed accelerator, stopped and then again in 1^st gear, accelerated more, turned his wheels right, 2^nd gear , 3^rd gear, pressed accelerator harder and boom! He lost his control and smashed the car against the barrier along the bridge.

Next, when he opened his eyes, he found himself at a hospital surrounded by his kith and kins. He had survived numerous injuries. This evening was supposed to be the best day of his life. All these kith and kins were to see him getting married. But it was not destined to be. Richa had also some severe injuries. Only thing which was sort of a reliever was that both of them were out of danger now. This is how this young couple ended up having their wedding night in the hospital.

On the same day local newspaper published, “On the Nehru Bridge, angry mob beat a criminal brutally who was allegedly involved in shoplifting.”

Another portion of the same newspaper also said,”A car lost control and smashed against the barriers on the Nehru bridge. Reasons are not known yet. Severely injured victims have been admitted to SAL Hospital at Drive-in road.”

Shit happens again and again (part-2)

[Recap: Mitika was one of my best friends. In Nov 2004,  due to some misunderstanding, our friendship saw a phase of distrust which is described in my last blog.]

After the last incident in November 2004, I waited for some more time. As they say, time is the best healer; it worked same for our friendship. After a gap of few months, we again started chatting on internet and phone frequently. Also, once in a while she used to come to my campus. That’s how it seemed things were getting better between us two.

She used to discuss various things regarding her career, life and other matters. I used to feel proud that she valued my advice so much and even sometimes she also used to give some good advice. That’s how a connection was developed between both of us.

In short, one and half years after the Incident-1, which was somewhere around mid of 2006, it looked like  the things were again back to normal.

Incident-2
February-2007 ............

19 February of 2007 will always be a memorable day for me because this day my elder sister was going to get married. So, being her only brother, I was super excited. This was also my last year of graduation.

Since, my sister is everything to me; I wanted to contribute as much as I could do to make it the best wedding ever. I was trying to look after the arrangements as much as I could do. Shopping, preparing list of invitees, getting invitation card printed, arranging stay for the guests were some of the activities where I was totally instrumental.

Finally, the auspicious day arrived and my sister got married in a grand ceremony with great pomp and show.  Many of my friends and their parents also joined the party.

After the wedding day, everyone was relaxed and so was I.  Finishing all the post wedding responsibilities, I came back to my campus. I had been away for more than one week at a stretch.

That evening after the dinner, I was not feeling like doing anything or studying, though my exams were approaching. I was just lying on my bed and was deeply into the thoughts of weddings and various events which took place before and after the wedding.

In the meantime, somebody knocked.

“Come in, it’s open,” I said in a loud voice so that the person behind the door could listen.

“Praveen sir, you have a phone call downstairs,” The telephone attendant informed me by pushing his head through the door and keeping rest of the body out.

“Tell him that I have got a cell phone and my number is 9415440562. Ask him to call me on this no.,” I almost ordered him. This cell phone was given to me by my elder sister around one month ago as she got a new one.

“But it is she not he.” He smiled.

“Whoever. Go and tell what I just told you,” I was little uneasy on his smile.
        

Just 5 minutes after he was gone, I got a call on my cell phone. It was some number, which looked little familiar.

“Hello, Praveen” that feminine voice said.

“Hello” I said.

“What yaar, now you have got a new cell phone so you will forget your old friends, right? ” She said.

“Of course not, Mitika. Why do you say that? And also that is a not a new phone. Anyways, tell me how are you? It has been more than 20 days since we talked” I said as I recognised her voice.

“Yeah.  All because of you. In the last week I tried to call you 3-4 times but everytime your telephone attendant used to tell that your room is locked.”She explained.

“Oh, you don’t know. I was not in the campus. I was so busy with my sister’s wedding. You know it was great wedding. So many guests, so many arrangements. I was so enthusiastically doing whatever I could do since it was Didi’s wedding. It was great fun. So many relatives, I saw together after a long time. Also many of my friends could make it to the wedding. Their presence just augmented to the fun part. You know it was the first experience for me and I totally enjoyed it along with my friends.” I told her with my excitement overflowing.

“Ok, I get it. You were busy in your sister’s wedding alongwith your friends. Great, good to hear that. You must be tired now. Get some rest. I gotta go, by the way.” She said and this time her voice was totally dry with no interest in talking to me further.

“You going, what happened. Just now you called and we haven’t talked enough...” I asked.

“Nothing, just some work. Talk later, bye.” She said and didn’t wait for my ‘bye’ and hung up.

Wondering what was wrong with her, the moment I put my cell phone in my pocket, it just flashed in my mind the reason of this sudden change in her behaviour. I realized that I had committed a mistake rather a blunder. I realised that I had forgotten to invite her in my sister’s wedding. Damn it!

“How could I just forget to invite her? She is one of my best friends. How did it really happen? I am just a jerk,” I cursed myself.

“I will tell her that it was because I am the only brother of my sister so I had loads of work hence it just slipped from my mind. May be I can tell her that I went to her home but nobody was at her home to receive the invitation card. Or I can tell her that not many friends could make it to the wedding, only few neighbhours came as all of it happened so fast. Or I can tell her that it wasn’t a grand ceremony, only a small gatherings of some close relatives. “I was just exploring all the options which could possibly convince her why I could not invite her in the wedding.

Finally, I figured out some excuse and decided to call her and tell her the reason why I could not invite her. I decided to call her the next day and explain the thing.

Next day, it was 9:30 pm and I was just flipping my cellphone with little nervousness. I was planning to call her but I was little scared with the thought ‘what if she won’t buy my excuse.’

Anyways, gathering all the courage, I called her. I was fully prepared to pour in front of her whatever story I could develop.Suddenly, caller tune of her phone discontinued and I heard “Hello” . It was some mature voice.

“Hello Aunty. This is Praveen. Can I talk to Mitika if you don’t mind?” I asked politely.

“Haan Beta, of course you can. Why would I mind? Wait, let me call her,” she said and called her in a loud voice.

“Beta, she is coming. By the way, is everything fine? Today, Mitika looked little sad. Is there any problem with her? Do you have any idea, Beta?” She asked.

“Yeah aunty, everything is fine. But if you feel so, I will talk to her and will surely try to find out the reason of her sadness. Don’t worry aunty,” I said but on the same time I was really ashamed of me as I totally knew the reason and I was the culprit.

“Ok Beta, she came. Talk to her. Take care. Good bye,” She said and went away after handing the receiver to Mitika.

“Hi Mitika, how are you?” I asked in a voice as if nothing happened.

“Do you really care?” She replied. And with this statement, a bomb was dropped.

“Yeah, yeah, of course. What do you mean...” My voice was stumbling.

“Look Praveen, you are a great guy and of course I do not intend to teach you anything. But only thing I wanna say is that if you call somebody your friend or probably your best friend then that person gets a right to share your joy and grief both. She will be the happiest person accompanying you in your happiness. This is called friendship...” She explained. This time her voice was very calm and sad.

“But...” I tried to interrupt so that I could put across my clarification but couldn’t succeed as she had something more to say.

“And you know what it hurts when you get to know.... Well, leave it.” She didn’t complete her sentence.

“But..” I again tried.

“Ok fine, I’ll call you later. Gotta go.” She said.

“No, but...”I tried again but figured out that the line was disconnected.

I thought to call her again but could not gather the courage this time. I thought she would call once she would get over with all these things. But I was wrong, she never called.

It’s not that I didn’t try from my side. I called her couple of times but everytime one of her family members would pick the phone and told me that she was not at the home.

So, was this the end of our friendship? Maybe.... (To be continued)