4. Indian Currency and its value

From the time of civilizations, Currency has existed. From barter system to coins to currency notes. Post colonial era, Every independent nation has its own national currency. India since its independence has chosen rupee to its currency which existed during British Rule. Every nation has its own regulatory body to control its currency. We have RBI to do the same.

Why do we need currency? All transactions within a Nation will happen through currency. Soon after independence, When India was not yet dependent on foreign countries, Its currency was not evaluated against international currencies and our currency was only relevant to domestic needs. Once we started doing business with other countries, Other countries wanted our currency to be valuated against international currencies. As the globalization became increasingly prevalent, Business with other countries became inevitable. So, Our currency had to be evaluated with the world market. In the Nehru's socialism model, State controlled country's production and manufacturing which agonizingly led to Red tapism, nepotism and corruption.  Our production and manufacturing dropped. Entrepreneur's got vanished. We reached a situation where we had to devaluate our currency so that others can invest in India, provide loans and do business with us. Below is Rupee against Dollar since independence,

1947, 1$ = 1INR

1962, 1$=4.8INR

1966, 1$=6.5INR

1975, 1$=8.4INR

1985, 1$=12INR

1989, 1$=16INR

1995, 1$=35INR

1998, 1$=41INR

2004,1$=45INR

2009, 1$=48INR

2014, 1$=60INR

In 66 years, Indian Currency has been down 65 times against US Dollar. In terms of real value, From being equal at Independence, We are now 60 times down in 66 years. We can say, One time down every passing year against Dollar.

So, The Nehruvian socialistic model's tryst with destiny happened to be falling down every passing year. Even though, Currency evaluation is the not the only true indicator of our well being, It surely is one of the most important factor in this globalized era.

What makes Dollar so strong? Because of the oil trade monopoly. Every country needs oil which mainly comes from Middle East and other few countries. All Middle East countries except Iran in few cases tend to accept payments in Dollars. So, The transactional value of dollar in international market will hold strong unless there is a new global leader who can influence more than USA.

Shouldn't we Indians have such ambitions? There are few countries like Japan who intentionally keep their currency devaluated because they dont want to hamper their exports but how relevant is this strategy needs to be further evaluated. It mainly depends on the volume of your imports and the value of them.

In present scenario, Balance of trade, Indian earnings from foreign countries(IT services) directly affects GDP. Our GDP is our economic indicator.

What happens if our GDP falls continuously? Our Country's ratings will go down. People will stop investing in India so we would have to devaluate our currency further. It will again make poor and our costs will escalate. So GDP in turn will fall back starting a chain reaction of national crisis.

The way out of this mess is to,

1. Strengthen our currency by increasing its brand value in international market.

2. By reducing balance of trade.

3. By bringing more long term investors to India who invest in infrastructure.

4. By influencing developing nations to trade in Rupee.

5. By forming an alternative power center for countries depend on us.

It surely is not going to happen overnight given the damage that the lazy corrupt Govts of past has caused to our Country. We should however promise ourselves that we will not a wrong step here onwards. The Champion of Surplus budget is at the helm of affairs. Let's hope for meaningful days ahead. Let us contribute to it.