As was feared, the Indian rupee has slumped to Rs 80 to a dollar and, observers feel, even this is not the bottom. Even as the Indian currency continues to be weak and shaky against the greenback, a blinkered government, instead of taking imaginative and effective steps to stem the rot and prevent the rupee from falling further against the dollar, is consoling itself that the rupee has not gone down against any other currency.

The downward drift of the rupee clearly indicates that it is extremely weak against a surging dollar. This is proved by the fact that inspite of the Reserve Bank of India spending more than $ 41 billion from its forex reserves to shore up the country’s currency since February 2022 and reducing the import cover to single digit, the rupee continues to depreciate. Even as economists have voiced concerns that capital flows into India during a period of global risk aversion could be insufficient, FPIs on the other hand are continuously disinvesting in the Indian stock market. This year FPIs have been on a selling spree and during the first half (January to June 2022) dumped stocks worth Rs. 2.1 lakh crore — the highest ever FPI selling seen during the first half of any calendar year.

The government has not taken any effective measures to stop FPIs from fleeing the stock market. This has given a further blow to the value of the rupee against the dollar and stock prices in India have fallen by over 9 per cent so far this year. The Reserve Bank and SEBI have not been able to bring back FPIs yet, as valuations of Indian stocks are still considered high and FPIs see no urgency to invest in India.

Another avenue to augment foreign exchange reserves is by boosting exports. But the government has not taken any effective measures on this count even as imports are on the rise. It is feared that the balance of payments may turn into a deficit this year after three years of a surplus, putting further pressure on the Indian rupee to depreciate even more.

Though the rupee has already breached the crucial Rs 80 mark, most observers have turned pessimists and say they will not be surprised if the rupee touches the Rs 100 a dollar mark in the next 6 months to one year, unless the government takes effective fire-fighting measures.

The need of the hour is to augment foreign exchange reserves and one proven way to do this is to woo NRIs by devising a special scheme like the Indian Millennium Bonds of two decades ago, or guaranteed FCNR deposits. During the USorigin ‘taper tantrum’ of 2013, a separate concessional swap window was opened for attracting FCNR bonds so as to raise $ 34 billion. Non-resident Indians love their mother country and would wholeheartedly support such schemes where they can get a little more interest.

Unless such schemes are floated, the rupee will continue to remain under pressure. With the successful floating of such NRI schemes, even FPIs may start coming back. Such a situation will provide some respite to the Indian currency in the days to come.