The headline seems funny, right? But it is a grave concern for the Indian economy.
Tumblr was worth so, Yahoo! bought it. But do you think rupee is worth in the current market situation? The Indian rupee is no more blockbuster currency among Asian currencies as it has fallen miserably this year.
If we see the quantum of fall this month itself, it fell more than 10 percent. To evaluate how rupee has performed, read the article from moneycontrol.com; Rupee to see worst quarter in 10 years.
Now if we come to the basics, rupee’s downward spiral can be attributed majorly to the current account deficit, sudden policy change by major central banks, read: U.S. Fed and Bank of Japan (BoJ) and the Indian economic bottlenecks. To understand more about economic bottlenecks please check one well written article by Mr. Swaminathan Aiyar; Why RBI’s fears about India’s growing current account deficit are misplaced.
In the present market scenario everybody expects more exports from the country and more internal consumption driven system. To do so banking entirely on Reserve Bank of India to cut the interest rate so that we can boost the competition and make money easily available in the economy is not justified. When your currency has depreciated to a level where foreign investors are dumping bonds and getting rid of the Indian stock market, plus overall investment to the country is low, an interest rate cut is definitely not a wise step. Thus, RBI is not in position to cut the interest rate even though the headline inflation has eased a bit.
Situation has become tricky for the Indian economy which has lost many opportunities in past few years. Its failure to implement GST, lack of clear cut investment policy, tax regime for corporates and FIIs/FDIs are few major points to be noted here. Now, the Indian economic system has to wait and get played by other influential central banks else accept the new level of its currency value against the dollar for the coming months- expecting it will get subsidise soon.
When India had chance to grab investment flow it failed to capitalize. So far, asian counterparts have done good enough to keep their currency level under control and they are still favoured as investment avenues when compared to India. I wish, the Indian currency could have shined just like Tumblr. Alas! rupee is tumbling indeed.