Confident Nation Gives Rupee an Identity
Union Cabinet has given rupee an appropriate and attractive symbol. The symbol designed by a post graduate in industrial design from IIT, has been selected out of three thousand designs submitted for the purpose. By recognizing this symbol the government has done a commendable job by including rupee into a select list of currencies, which have symbols of their own. So far only a few currencies including US dollar, Pound, Euro, and Yen etc. had their symbol. Undoubtedly this symbol of rupee will soon be incorporated into computer fonts and will be recognized world over, but it may take some time to really carve an identity for itself internationally.
We understand that only a few currencies act as international currencies and are acceptable internationally for settlement of international payments. When it comes to settlements for exchange or debts internationally, they are made in US dollar, Pound, Euro, Yen etc. Even the strength or weakness of an economy is measured by the stock of these international currencies held by that economy. In the year 1990, when India was passing through a serious crisis, rating of our economy by international agencies was downgraded because we had very few dollars for settlement of our imports and international debts. In absence of sufficient stock of dollars, to save the country from the agony of erosion of sovereignty, we had to mortgage our gold at that point of time.
Rising from that worst situation, today our nation has reached a level that we have foreign exchange reserves of more than 300 billion US dollars. It is an open truth that India is second fastest growing country of the world next to China. After the disintegration of USSR, there was a general feeling that now the world is uni-polar, with un-contested dominance of the US. Today US is in very bad shape. Unnecessary involvement of US in Iraq and other countries, rising budget deficit and rising financial indiscipline has led US economy into a financial crisis, from where it is not finding a way out. As a result US dollar is getting weaker against other currencies of the world. On the other hand Indian economy is showing a high rate of growth, exports from India, especially that of services are rising and Indian scientists and professionals now dominate internationally. There was a time when our exports used to be less than half percent of the world’s exports. Now they are 1.1 percent of world exports. Major gains are seen in exports of services, which are now 2.7 percent of the total exports of services (2008-09), thanks to increasing software exports from India. Even the global slowdown could not adversely affect this trend. Earlier we used to receive very little FDI despite red carpet welcome accorded to the foreign investors, but recently in last few years we find a change and the country has started receiving good sums in FDI and now the nation is getting 3.3 percent of global investment.
This has been made possible due to excellence demonstrated by Indians in almost all fields including information technology, defence, space technology and health. Not only that people are coming from all over the world, specially developed countries, for their medical treatment, they are also seeking ISRO’s help in placing their metrological and communication satellites by hiring PSLV. Continuing IT revolution of India is known everywhere in the world.
Rupee is Stronger than Before
At the beginning of 2002, A US dollar used to be equivalent to rupees 49, which came down to rupees 40.5 by May 2007. This means that rupee started getting stronger vis-à-vis dollar. In the last two years as a result of global crisis, a large outflow of foreign exchange has been made by FIIs to their respective home countries. Reduction in the domestic stock of foreign exchange has weakened rupee vis-à-vis other currencies. As a result rupee dollar exchange rate is rallying between rupees 45 and 47 per dollar. Earlier value of rupee was constantly getting eroded due to the policy of devaluation of rupee and free trade. Now this strength of rupee is seen with respect to all currencies, including Dollar, Euro, Pound and Yen.
How Weakness of Rupee Could Overcome
Earlier our balance of payment always used to be in deficit. Due to short supply of dollar against demand, value of rupee continued to get eroded. Year after year we had to give more and more of rupees for every dollar. Between 2002-03 and 2003-04, our balance of payment was in surplus. This was due to unprecedented increase in software exports, remittances from non resident Indians, large inflow of FDI and FII etc. Though balance of payment on current account has again turned negative in the last few years, constantly high and rising foreign exchange reserves have helped in strengthening of rupee.
Let’s Take Advantage of Strong Rupee
As the rupee appreciates, people all over the globe, will get attracted to this currency. It is obvious that now since dollar is depreciating vis-à-vis other currencies, people would prefer to keep other currencies including rupee, instead of dollars. Under such circumstances government, is working fast on a scheme to issue rupee denominated international debt. In the past, official debt, as well as commercial borrowings, both was repayable in terms of dollars. Not only government can take the benefit of borrowing at cheap rate of interest, but Indian companies can also borrow internationally at cheap rate of interest by issuing rupee denominated debt. The proposal has been mooted by the Department of Economic Affairs, Ministry of Finance and is being discussed by policy makers at a higher level. There are many other advantages of issuing rupee denominated debt. One, there would not be any unwarranted expansion of money supply despite borrowings from abroad. Two, there would not be any currency related risk because loan would be repayable in rupees. Three, there would not be any risk of large scale flight of capital in the event of fast upheavals in exchange rates. In fact then the risk of upheavals in the exchange rates would be borne by foreign investors. Four, government companies and private companies may now have the facility to borrow at a lower rate of interest and as such this would help us in keeping the rate of interest low in the economy. Global rating agencies have increased India’s sovereign credit rating to investment grade. Experts feel that due to this improved rating the country has become attractive to a range of global investors. This would help the government to raise debt at highly competitive rates.