The falling rupee

The rupee is steadily depreciating against the dollar after Donald Trump imposed trade sanctions on China and recently after unilaterally getting out of the nuclear deal with Iran and restricting trade with Iran on the flimsy pretext that “Iran’s continued support for terrorism and development of its ballistic missile programme poses a threat ……to the United States.” A falling rupee will make imports costlier while trade restrictions on Iran will directly harm India because India is one of the biggest importers of Iranian crude. Depreciation of the rupee will lead to more inflation and balloon the fiscal deficit of the budget. And this at a time when the economy continues to be hit by recession. For all the pep talks of the Finance Minister, the Index of Industrial Production has fallen further.
The policy of “widening and deepening India-US friendship” initiated by the Manmohan Singh Government and vigorously pursued by the Modi Government has brought no tangible benefit to India. But it has helped the US to sell costly military hardware to this country. The Centre seems to have realized that the Indo-US relationship has been one-sided in favour of the US and a course correction is necessary. A conscious effort is visible on the part of New Delhi to iron out differences with China and explore possibilities of cooperation between the two countries. Simultaneously, an effort is on to renew the close bonds India had with her all-time friend Russia. The Prime Minister’s coming visit to Moscow for an informal summit, following the informal summit with Chinese President Xi Jinping shows that India is trying to lessen its dependence on the US. The decision to buy the Triumf anti-missile shield from Russia at a cost of about Rs. 40,000 crore ignoring Washington’s frowns are a positive sign.
On another plane, the Prime Minister’s “Make in India” still remains a slogan rather than a reality. To give a recent instance, great publicity was given to the launching of a Kolkata class destroyer, built “indigenously” under Project 15A. What the reports did not mention was that its main gun is imported from Italy, the gas turbines from the Ukraine, the LR-SAM from Israel and the BrahMos missile it is equipped with is a joint Indo-Russian co-production. This is a far cry from “Make in India”. The ship is built indigenously but the wide variety of equipment it is fitted with is imported.

Sunday, 20 May, 2018