The downward journey of the Indian currency started on August 15, 1947 — from one dollar equaling one rupee then, the plunge has continued unabated and the rupee has touched an all-time low of Rs 79.50 to a greenback in the 75th year of our Independence. While the US currency is getting stronger by the day, our own currency has been getting weaker and weaker since Independence. And even after the latest plunge, the rupee continues to be shaky against the dollar and one would not be surprised if it plummets further to below Rs 80 a dollar in the near future.

The reasons for the current downward drift of the rupee are not far to seek. Foremost are US inflation and rising interest rates, the upsurge in crude oil prices, the rising deficit in the Indian economy and, above all, the outflow of foreign funds from India with the exodus of FPIs (foreign portfolio investors). For the last seven years, FPIs have been net sellers in the Indian markets. This has pulled the Indian markets down. The rate hike by the Reserve Bank has also made things worse for the markets and the rupee.

In order to stem the rot, the Reserve Bank has announced a series of steps to arrest the rupee’s slide against the dollar. The central bank has doubled the annual overseas borrowing limits for companies to $1.5 billion and has temporarily abolished interestrate caps for banks so as to attract deposits from non-resident Indians. The RBI has also eased rules for foreign investors to invest in government and corporate debt in India. However, the rupee has come under continued severe pressure, hitting a series of lows in the past few days as foreign portfolio investors continue to pull out their investments from India and the country’s trade gap progressively widens. The trade deficit reached a record level in June and is still growing because of rising import costs of crude, gold and other commodities.

The RBI believes that the latest steps taken by it will help diversify and expand the source of forex funding and reduce currency volatility. However, the bank’s dollar bait is less tempting now and the government needs to take imaginative and effective steps to increase the inflow of dollars.

There is an urgent need to boost exports and ensure that export earnings are brought into the country at the earliest. Exporters are habituated to delay repatriating earnings, expecting a further slide in the value of rupee and concomitant bumper profits. Foreign investors should be urged to reinvest in Indian stocks and non-resident Indians should be persuaded to deposit more dollars in Indian banks and increase their remittances to India, while unnecessary imports should be discouraged. The country’s foreign exchange reserves which were over worth around $ 600 billion are steadily coming down. This is a very delicate situation and the government as well as Reserve Bank should take immediate steps to shore up the Indian currency. The government seems to be taking consolidation from the fact that there are several countries in the world today whose foreign exchange situation is worse than that of India. But this is nt a situation which should make us happy. There are vat opportunities for Indian economy to grow at a fast pace if certain problems like the depreciation of rupee are solved at the earliest.