Oppn sharpens attack as rupee sinks to 70/$
Crisis in Turkey makes rupee the worst performer of the year, upsetting Modi govt’s fiscal math
NEW DELHI: The rupee plumbed new depths on Tuesday, dipping below 70 per dollar for the first time ever in a rout of emerging market currencies led by the Turkish lira, complicating the job of the Reserve Bank of India (RBI), potentially upsetting the government’s fiscal math and handing fresh ammunition to political opponents of Prime Minister Narendra Modi.
By the close of trading, the rupee clawed back some of its losses to end at 69.89 per dollar, up from its previous day’s close of 68.93. In intra-day trading the currency hit a lifetime low of 70.08, following a 1.6% drop in the previous day’s trading. The rupee’s loss of 8.7% so far this year makes it the worst performing Asian currency. Dealers said some state-owned banks sold dollars to bolster the rupee, perhaps at the behest of RBI. “The sharp drop in the domestic currency complicates the RBI’S job of keeping inflation in check as India imports oil and even if oil prices stay at the current level, it will cost more to buy it. Moreover, this is more worrisome for corporate entities that have for- eign currency borrowings,” said Soumyajit Niyogi, associate director, India Ratings and Research.
While the macroeconomic context is different (largely because of India’s comfortable foreign exchange reserves now), the situation is broadly reminiscent of 2013, when India was governed by a Congress-led United Progressive Alliance government.
In 2013, India joined the ranks of the so-called Fragile Five emerging market economies (the others were Turkey, Indonesia, Brazil and South Africa) amid a free fall in their currencies. A string of policy measures put in place by then RBI governor Raghuram Rajan helped the rupee stabilise then. At the time, Narendra Modi, who was then chief minister of Gujarat, attributed the rupee’s loss to mismanagement by the central government and not just economic factors.
On Tuesday, Congress president Rahul Gandhi took a jibe at Modi. “Modiji finally managed to do something that we couldn’t do in 70 years,” he said on Twitter.