Rupee @ 65
And Government Clueless
The Question doing the
rounds in the market is – which will reach Rs.100 Mark Faster – Rupee vs
Dollar, Onion per KG, Or, petrol per litre?
The question is not of my
invention. I have been hearing it for quite some time. The other day, Actor, Kabir
Bedi was wondering how, Rupee Value per Dollar was, keeping pace, exactly with
his Age, in years. And, he has been proved wrong very swiftly in a matter of
days. It has overtaken his age, my age and many others’ age. Government stays
absolutely clueless – except telling all of us – not to Panic. This shows that
Government is panicking – and it doesn’t want company.
And, Government has many
other headaches – apart from Rupee value. Many files are missing from Coal
Ministry. Files do go missing. They do get legs. After all, they don’t want to embarrass
their authors. So, they go missing. Very faithful. Not always. But, some times.
The Government’s much
touted Food security Bill is in some trouble. Everybody wants it – but nobody
wants it as it is. I wonder from where the money and the food grains will come
in say, the next 5 years. Don’t we have a five year plan, backed by our
planning commission? The planning commission and the PM should be telling us
how the bill will be funded in the next five years. Else, UPA II will deplete
all food grain reserves in the Election year, add about 50,000 crores of rupees
to the Budget deficit – and leave it to the next government to bridge these two
deficits. No Bill of this nature should be passed without knowing its
implications for the next five years.
Let us come back to Rs@65.
The rupee is dangerously at Rs.65 per Dollar. It is said, it was Rupee One per Dollar
in 1948. In 66 years, Rupee has weakened to almost Rs.66 per dollar. Perhaps,
by the time, you read it, it may have reached it, confirming Kabir Bedi’s premise that Rupee keeps up with his age.
It is bound to be like
this – unless, and until, we focus on Production and construction of value –
from every rupee that we collect from the tax payers. Currently, both central and
state governments are vying with one another in collecting – and distributing
the tax and non-tax revenues in some way, which they can call social justice.
No Government in India really
bothers much about production and distribution. Every Government bothers about
collection and distribution. It is a monumental economic tragedy that goes on in
India.
I don’t think, even one
NET ADDITIONAL JOB has been created in any State (barring a few exceptions like
Gujarat) taking the government and non-government sectors taken together. And, by JOBS, I mean productive jobs. Fortunately,
we don’t have official unemployment statistics in India – like they have in the
US. US declares and examines its unemployment statistics every week! And, that US
statistic, either elates or depresses our Indian stock markets, for some
strange reason, on a weekly basis. We never bother to demand from our
Government , similar statistics – possibly for the reason that we will be
permanently depressed, once we have them. But, we must demand – because, after
darkness only comes the light.
We have, as an
alternative, the IIP statistics. They are obviously not much reliable. But,
they are the only ones we have. We don’t make the flimsiest attempt to make
them better, more reliable. We do rely on them, no matter how unreliable they
are.
We rely on them – and get
depressed – because, even the unreliable statistics, are not willing to cheer
us up. They are depressing. They are going down. And, some of us do find time,
to get depressed. The RBI does. The Government does not. Others don’t know what
to do.
RBI goes on increasing the
interest rates whenever Inflation goes up. It is its mandate. It is so ordained
in the science and Art of Economics. RBI has forgotten the Art part but only
remembers the Science Part.
In any field, which is both
an Art and a science, the science does not work unless, it is used as an Art.
RBI knows the science – not the Art. That’s my view. Government knows neither.
That’s the whole trouble. That’s again, my view. If you seek proof, I can’t
give one – except that, the Inflation never goes down, despite 2 years of its
medicine from RBI; the IIP numbers go down always, despite all inaction by
Government; and the rupee goes down against dollar – for reasons best (un)known
to our Government and RBI.
If I were the Government
and RBI, I would have cut down Gold Imports to 50% when Rupee went up down from
Rs.54 to Rs.58. I am almost definite that Rupee would not have depreciated
against dollar if this was done. A stitch in time would have saved nine – or 11
to be exact (65-54 = 11). That was not done then. That is not done now.
Government and RBI have other thoughts. They are better economists – but with
no clues, no remedies.
They say – don’t panic.
Because, what is the use? No use panicking. People say, Dollar may go up to
Rs.70. Why? It is going up. It is there for all of us to see. No point in
asking why. Suppose, Government curbs Gold, luxury cars, high cost TVs and other non-essential
imports by 50% (instead of merely imposing import duties on them) what will
happen? Need for dollar comes down immediately and drastically. If there is no
need, who will buy dollars at such high cost? That brings down dollar value
against rupee. But, will Government do it? I don’t know.
When Inflation is up, when
IIP is down and when Rupee is depreciating against dollar – RBI is fighting
with its limited weaponry. But, Government is watching. To my mind, it did not
lift even its little finger to fight food Inflation. Do any of you remember a
single meeting at the level of secretaries or Ministers being conducted
involving all states – by the Union food and agri Ministries – to tackle food
Inflation? I don’t remember. It was always the RBI that was crying hoarse on
Inflation, when, in fact, the Union Ministries of food and agri must be doing a
lot more to contain food Inflation.
Government at Centre is
bent on NREGA – knowing fully well that almost no work is being done and no
assets are being created under the scheme – even though payments are made. This
is being justified – by many of us on many grounds. Like, what if poor people
are given money? This is utter insanity. You can plan; you can get solid asset
creation work done. Then, you can make payment. If there are no assets against
these payments, it shows we are poor planners. Creating Assets needs planning
before execution. No one can be against NREGA if, it results in asset creation
and real Jobs. My strong feeling is – no man should be paid for idleness. It is
dangerous. It is unethical. A man or woman accustomed to payments for idleness
will be reluctant to seek jobs where real work is involved. Man/woman is always
slave to Habits. And, Idleness for which one gets paid also – is a dangerous Habit.
Food security Bill is also similar. I would say, create work – and pay the
persons. India is one country, where huge work awaits to be done. We only need
to plan first. If we can’t, it is pure, poverty of imagination.
If NREGA and Food security
Bill and similar schemes in states are really planned with solid asset creation
as the quid Pro quo, there will be no poor within 5 years. All would become at
least Middle class and India will be full of Great, valuable, Productive
assets. Otherwise, we will always have a growing army of people seeking free
food, free payments – not work.
People can’t be blamed for
this. People will be willing to work. Any work will be self satisfying, if
adequately compensated. It is unfortunate that Governments do not want to plan.
Coming back to Rs.65 per
Dollar, Are we really waiting for Rupee to reach the 100 mark, get tired in the
process and stop there on itself? Just stop unproductive imports or reduce them
to 50%. That is all that is needed. No liquidity squeeze is needed. No High
Interest rates is needed.
To my mind, this is simple
economics – or, the Art of economics. It might hurt the Gold and Jewellery
Industry. But, none else.
I admire our PM and FM as
solid Economists. So is Raghuram Rajan, the RBI Governor incumbent. They must
put pressure on respective Ministries – and get things done. Sir, stand by the
Rupee. Stand by Growth. Stand by RBI in containing Food Inflation. The economy
will look up as suddenly as it has nosedived.
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